A smart way to invest a business sale in your retirement plans

Written by Adam Hildred on 3rd October 2024 | 5 minute read

Putting the money from the sale of his business into a Family Investment Company was a natural choice for David*, with the benefit of substantial tax savings.

David had run a successful business in the manufacturing sector and was making plans for his retirement. As a long-standing corporate and commercial client of Tees, he opted to use our in-house Wealth Management service to advise him.

David had several existing assets, including savings and two pension funds, along with the sale of the business, which raised over £10 million. While some of the money was invested in pensions, an ISA and investment bonds, the majority went into a Family Investment Company.

Adam Hildred, Senior Wealth Planner at Tees, explained that Family Investment Companies are one of the least-used financial products available in the marketplace. However, for clients like David with corporate and commercial experience, it was something he could easily understand and, therefore, a natural choice.

"If we had put all of these assets into a standard investment area, with capital gains tax and dividend allowances coming right down, David would be paying a lot of tax on that money. The Family Investment Company provides a completely different structure, being under corporation tax rates, you are paying 25% tax instead of potentially 45%, and at the same time you can offset your fees and interest on the loan made into the structure against whatever profit you make.

The Family Investment Company fits a wide range of potential. Whether the amount to be invested is £1 million or £100 million is irrelevant; the recommendation will be pretty much the same. Full accounting advice is always required."

Clients are advised to start their planning long before a business is actually sold.

Adam continued, "Tees is one of the few legal firms with our own Wealth Management advisers. We take a holistic approach to looking after our clients' often complex needs, which includes input from several different experts.

At Tees, we have all the expertise under one roof, so if a client chooses, we can look after the legal aspects of their retirement plan, such as wills and lasting power of attorney (LPA) which we did in David's case."

*Names have been changed to protect the privacy of our clients.

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Past performance is not a reliable indicator of future returns and all investments involve risks. Some information quoted was obtained from external sources we consider to be reliable.

Tees is a trading name of Tees Financial Limited which is authorised and regulated by the Financial Conduct Authority. Registered number 211314. Tees Financial Limited is registered in England and Wales. Registered number 4342506.