another lump sum question

newhit

I am just turned 60 and my wife and I are thinking of selling our business (just thinking;)). If the circumstances are right and we go through with the sale we could be looking at a lump sum of about £600,000 to £900,000 depending on the obvious volatility of such an endeavour. My daughter has a business which definitely struggles at times and I want to ensure that she has a monthly income from the sale to act as a buffer for her future but I also want a decent monthly income from the money for me and the missus. What is the best way to proceed without being consumed by various taxes? Would it be best to split the cash and simply put half into a Prudential Plan for us and the other half into a Pru plan for her to keep the tax down or keep the lump sum together and take out a single investment plan transferring a monthly sum to her?...........

Be gentle, I realise the naivety of my question but I need to get started on this paper chase early.

newhit

I'm not keen on high risk portfolios that's why I mentioned "Pru Plans" which provide fewer risks..........maybe.

xylophone

See http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm re gifts and IHT.

If you are unaccustomed to investing you might wish to consult an IFA http://www.unbiased.co.uk/

What is your/ your wife's pension situation?

newhit

Thanx for the reply...........

She is "only" 55. I realise that we should consider very carefully if this is the right time to pursue this course of action and if we are not a bit premature but I need to get a feel for what is on offer. I don't want to let things wash over me as I watch repeats of Andy Murray winning Wimbledon, satisfying as it is .

newhit

Looks like I'm working 'til hell freezes over! HMRC takes the proverbial "meat cleaver" to any benefit I get from my, and my wife's, years of toil.........I know, the sympathy queue will be enormous .

Reaper

To be honest for a sum that big you would be better off talking to an IFA than getting opinions on a forum. Maybe even more than one to find somebody you have confidence in. I don't recommend asking your bank for advice.

The traditional income generators such as Company Bonds, Gilts, savings accounts, PIBs, guaranteed income bonds, property, annuities etc no longer look as safe or worthwhile as they have in the past. I would imagine you are best off using a variety of different investments ranging from the risky but highly tax efficient (VCTs, EIS etc) to lower growth but taxable ones. You might even choose an immediate vesting pension. There are so many options I wouldn't know what was best for your circumstances even if I was qualified to give advice, which I am not.

As a general rule I would suggest diversification is a good bet on a large sum.

newhit

Thanx for that.

An IFA is the only way to go in this minefield.

gadgetmind

newhit wrote: »

Looks like I'm working 'til hell freezes over! HMRC takes the proverbial "meat cleaver" to any benefit I get from my, and my wife's, years of toil.........I know, the sympathy queue will be enormous .

Yes, the queue will be, TBH. Entrepreneurs should be encouraged IMO.

Is it capital gains tax that's your issue? Can't you use entrepreneur's relief to keep this down to "only" 10%?

Aegis

newhit wrote: »

I am just turned 60 and my wife and I are thinking of selling our business (just thinking;)). If the circumstances are right and we go through with the sale we could be looking at a lump sum of about £600,000 to £900,000 depending on the obvious volatility of such an endeavour. My daughter has a business which definitely struggles at times and I want to ensure that she has a monthly income from the sale to act as a buffer for her future but I also want a decent monthly income from the money for me and the missus. What is the best way to proceed without being consumed by various taxes? Would it be best to split the cash and simply put half into a Prudential Plan for us and the other half into a Pru plan for her to keep the tax down or keep the lump sum together and take out a single investment plan transferring a monthly sum to her?...........

Be gentle, I realise the naivety of my question but I need to get started on this paper chase early.

For a sum like that you would likely want to look at entrepreneur's relief on the gain, the possibility of making pension contributions on your own behalfs before selling the business, income tax and capital gains tax efficiencies on the investments, ongoing pension and ISA contributions. And that's ignoring the use of more complex tax management strategies which may or may not be suitable for you.

You may also need to think about awful things like inheritance tax in the long run, as that sum of money combined with other assets will likely push your combined estate above the nil rate band and into 40% tax territory. If you structure your portfolio effectively to generate excess income, the ongoing gifts to your daughter might be immediately and permanently exempt from any inheritance tax implications, otherwise they might feasibly be brought back into your estate if the worst should happen within seven years of the date of the gift, so you should superficially ask about the best way to structure your support.

If you do decide to get advice, make sure it's independent (as restricted covers everything from nearly independent advisers through to company sales reps) but also make sure you understand everything you're advised to do.

newhit

Many thanx for all the replies. The "Capital Gains" tax was the one that hit me straight in the face. You'd think it would only apply to the "Get rich quick" brigade........... No, I don't think we are that type.

After all our efforts and years you'd think the state would be glad for us to not sponge off it and secure our future with all its ups and downs.

I am nowhere near up to speed but because of the good replies I've had and the fact that I'm now with an IFA I can at least ask some pertinent questions.