Services: Trust planning · Dividend planning · Personal tax
The situation
This family business is owned by a father and son, both active in the company and drawing substantial dividends. The son has two school-age children, both attending private school. The fees are significant, and the drawings used to pay them are subject to higher income tax rates.
The father is approaching retirement. His drawings already exceed what he needs personally. The question was what to do with the excess.
What Ascentis proposed
Rather than the father accumulating savings on his excess drawings and paying higher-rate income tax along the way, we proposed placing a number of his shares into a trust for the benefit of his two grandchildren.
The trust receives income in the form of dividends. Those dividends are taxable on the grandchildren, who have no other sources of income. The trust then uses that income to pay the school fees directly.
The value
Potential income tax saving of circa £100,000 over the period, based on prevailing tax rates and both grandchildren remaining in school for the next 10 years
A straightforward structure. A very material saving. And a good example of what proactive personal tax planning looks like when your accountant is genuinely engaged in your whole financial picture.