Case Study 3
Tax-efficient income after scaling down business activity
That period in life when you've completed full-time employment, but not fully retired can prove challenging, in terms of delivering the right level of income - especially tax-efficiently. At London & Capital, we tailor bespoke solutions for specific client scenarios to fit in with desired risk/return profiles and circumstances as illustrated in the case study below.
After ten years in the hospitality industry running a successful company, a client reached a point in life when he decided to scale down business activity to the point where he was operating purely on a consultancy basis.
Despite the reduction in work, the client wanted to maintain a reasonably high level of income. This was made possible by virtue of the consultancy fees, an investment portfolio and a pension portfolio built up from previous employment. However, the challenge was to ensure that this was achieved tax-efficiently, thus retaining the greatest amount of capital in the portfolio.
Providing the total solution
Our first requirement was to analyse the pension and non-pension holdings to ensure that the asset allocation and risk profile was appropriate across the entire portfolio.
All too often we are introduced to prospective clients who have failed to treat their savings and investments as one combined entity, regardless of the different tax treatments of vehicles such as pensions and ISAs. Consequently, the various tax beneficial parts of their portfolio do not necessarily require them to distance themselves from their chosen strategy which can result in a “flawed” asset allocation.
Once the asset allocation had been addressed, we determined the most efficient way to arrive at the required net income level. Up until then, the client had been paying tax at higher rates because of his numerous income streams; each of which had historically been viewed in isolation.
The result?
Our open architecture approach and tax efficient structures enabled us to deliver the required net income level but in a more efficient manner. The client received the income required but was exposed to less tax in the process which in turn meant that a significantly smaller part of the capital in the portfolio was required to provide the income.