For many of our clients, business is at the very heart of everything that they do and this was certainly the case with David.
In his mid-50s and the owner of a medium-sized business, David has spent his career putting his business at the forefront of his priorities – including his finances. David had no assets outside of his business and pension. This meant that all of David’s financial value was contained within his business and inextricably linked him and his financial security to his business. An ill-advised financial decision that left him vulnerable.
With the financial position he found himself in, David wasn’t taking a personal income as effectively as he could, and instead chose to put as much into the business as possible. David wrongly believed that any income that he gained would be, in effect, taking money from his business.
When David came to us at Murphy Wealth, we wanted to ensure that we could provide security for him and a plan that meant his income was diversified, the value increased and, crucially, wouldn’t negatively impact his business in the ways he was concerned that it would. We did this by strategically restructuring how David takes income from the business, ensuring he was tax-efficient which enabled David to extract an extra £100k a year from the business at year-end which was then invested in a tax-efficient investment vehicle. All of this built towards tax relief and a net position of approximately 5% effective tax – a strategy we’ll now be implementing every year, creating value on an ongoing basis.
With our approach, David saved £15k in Income Tax, with the potential to extract a significant amount of profit over the next 5 years. For now, though, with the changes suggested and implemented by us, David already has a net benefit of £45k.
Finally, as we always do at Murphy Wealth, we wanted to ensure that David not only gained perspective and control of his finances but also had a clear strategy for the future. Our biggest challenge was David’s lack of diversified income. It meant that he was in a vulnerable, insecure position financially. We undertook some modest investments for David – boosting his investment portfolio and building up tax-free dividend streams from the investment.
With the boost in liquidity and savings made, David felt confident enough in his portfolio and financial standing to treat himself to a new car with the money extracted at the end of year one.
What is your dream? Where would you like your finances to take you? At Murphy Wealth, we provide tailored solutions to all manner of financial circumstances.
[Webinar] In conversation with Justin King: Your life plan and why it matters now
You may have heard us talking about Life Planning recently. We want to make sure that you get the opportunity to understand why Life Planning could be a game-changer for you to achieve your goals and be truly fulfilled. Join our webinar with CEO Adrian Murphy and Financial Planner Justin King to find out more.Read more