Tax free income for life ?
Many business owners restrict their remuneration to avoid higher rates of tax. Consequently, cash builds up within the company. They could be missing an opportunity to set up a tax free dividend stream for life !
An investment into a Venture Capital Trust (or and Enterprise Investment Scheme) would generate tax relief of 30% of the sum invested. That tax relief could be used to offset the tax on an additional dividend. This could be repeated each year over a 4 or 5 year period. At that point, under current rules, it would be possible to roll over the VCT/EIS investment to generate tax relief at 30% again. The tax relief on that reinvestment could offset the tax on dividends in that year and in every subsequent year leaving the business owner free to spend his dividends each year from year 5/6 onwards. This strategy could be continued into retirement with the rolling program of reinvestment generating tax reliefs to offset the income tax on pension income.
So which would you like? A VCT to provide you with some additional income or an EIS to give the benefit of Business Property Relief and help you to pass on wealth to your family free of inheritance tax?
Why not speak to us at SWLaw Investment & Financial Planning Ltd ?