Case Studies - Osbornes Tax and Advisory Limited
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Case Studies

School Fees Tax Planning Case Study 2

School Fees Tax Planning Case Study 2

How a management consultant’s tax savings covered the £25k in school fees he was paying for his 2 children.

The Situation

A management consultant, earning over £200k per annum approached Osbornes in order to ensure his tax planning was up to scratch. The management consultant was self-employed. His wife’s job was to raise and look after the children. His children were five and six years old. The costs of their school fees was £25k per annum.

The Client’s Objectives

The client was keen to ensure that he was as tax efficient as possible. The client felt that there must be more that he could do in order to minimise his tax payments without pursuing aggressive tactics. The client’s main objectives were in paying for his children’s school fees without it seeming like such a struggle.

Our Solution

Osbornes noticed that there were two simple things that could be done to improve the client’s tax position. These were:

  1. To ask the client to divert some of his income to his wife who had a personal tax allowance and was not using it. This would result in a significant tax and National Insurance saving.
  2. To set up a trust for his children so that some of the client’s earnings could go into a trust for the children so that their personal tax allowance could be utilised.

The Timing

The two elements of this plan were implemented within a month. There are no financial milestones that our service needs to be planned around and it can be implemented immediately.

The Value to the Client

 There was a great deal of value to the client including:

    • £90k of the client’s income that was being taxed at 50 per cent was now going towards school fees tax free as a result of maximising the personal allowances and basic rate tax bands of his wife and 2 children.
  • Over £33k per annum in tax savings – Osbornes managed to help the client save over £25k per annum in tax payments, ensuring that the school fees could be paid from the money he was already earning.
  • More time with the children – the client could spend more time with his young children without worrying about the burden of school fees.

     

Contact us

If you’d feel you’d like this increasingly popular answer to rising school and university fees, please contact us to see how we could help.

You can fill in the contact enquiry form to arrange a free initial conversation or call us on 0808 115 6384 .

In that conversation we would gather all the necessary detail regarding your affairs, we would then prepare a report outlining how we could assist to re-structure your affairs and the tax savings we would expect to achieve. It is then down to you to decide if you want to take things further.

 

 

 

 

 

 

School Fees Tax Planning Case Study 1

School Fees Tax Planning Case Study 1

How a business consultant saved £11k per child per year in tax and put £22k per annum to his children’s school fees as a result.

The Situation

In 2011, Osbornes were approached by a business consultant who was a higher rate tax payer and was a highly successful business consultant. This gentleman had 2 children in private education. His business had an accountant but his personal tax affairs were not as well catered for. The children’s school fees were a significant burden (£27,000 per child, per year, or £54,000 per annum).

The Client’s Objectives

The client was keen to ensure that he was as tax efficient as possible. The client felt that there must be more that he could do in order to minimise his tax payments without pursuing aggressive tactics. The client’s main objectives were in paying for his children’s school fees without it seeming like such a struggle

Our Solution

Osbornes were quickly able to identify that the client wasn’t making the most of the tax allowances the government granted to his family. We restructured his affairs so that part of his business could be placed  into trust. This enabled higher rate tax to be mitigated. By doing this, the personal allowances of his two children were maximised.

Timing

In order to ensure that the client got the greatest value from his efforts, Osbornes were able to put these arrangements in place in 3 weeks enabling tax savings to be made as quickly as possible.

The Value to the Client

The value to the client was immense. Some of this value is listed below:

  • Savings of £22k per annum were made which dramatically reduced the school fees that the client had to find (this amounted to £11k per child)
  • This has resulted in £66k in tax savings for the client since 2011
  • The client has a great deal more peace of mind as he is not constantly worried by the burden of school fees
  • The client feels less business stress – there is less stress on the business to support his children, meaning more can be reinvested in the business and less stress on him as the main provider for his family
  • The client spends more time with his family, taking more time for holidays & spending more time with the children in the evenings rather than at the office earning enough to pay for the school fees

Contact us

If you would like to take things forward then please give us a call on 0808 115 6384

Alternatively, please fill in the contact enquiry form to arrange a free initial conversation. In that conversation we would gather all the necessary detail regarding your affairs, we would then prepare a report outlining how we could assist to re-structure your affairs and the tax savings we would expect to achieve. It is then down to you to decide if you want to take things further.

If you’d feel you’d like this increasingly popular answer to rising school and university fees, please contact us to see how we could help.

 

Inheritance Tax – Investment Property Gift

Investing in property for our family’s future is  a very popular alternative to under-performing pension funds and high risk investments. However, make sure you protect the results of your hard work by planning in plenty of time for your inheritance tax liability.

A typical example is the case of a couple who owned 3 investment properties between them, totalling a value of £450,000. This meant  that including their home, cash and other assets, the total value of their estate was around £800,000. As a couple they were able to benefit from both of their ‘nil rate band’, or allowance, put together which amounts to £650,000. This still left £150,000 of exposed assets. Without any planning, the couple would face an inheritance tax liability on this of £60,000 which, as the property prices rise, will only increase year on year. We advised that the investment properties be gifted to their three children and for every year there after they gifted cash up to the annual exemption of £3,000.

Provided the couple survive for at least 7 years after the gifts of properties, the inheritance tax liability will be reduced to almost zero with any rises in value of the investment properties not being subject to inheritance tax.

If you would like us to review your estate and offer advice on the best ways to minimise your potential inheritance tax liability, please contact us here.

Inheritance Tax – Business Sale

Not only could your property be exposed to inheritance tax but also your business. Inheritance tax liability can be planned for and limited through ‘gifting’, however, this relies on the donor surviving at least 7 years. What can we do to ensure the security of your assets if this isn’t the case?  For example, one of our clients mentioned that they were thinking of selling a business worth £400,000 that had just been gifted to them by their parents. As the gift was a business, business property relief was available at 100% to reduce any inheritance tax liability on the gift to nil if the parents did not survive for 7 years following the gift. One provision of business property relief is that the business must still be owned at the time of the donor’s death or if sold, must be replaced with business property. We advised our client to use the proceeds of the sale to purchase other business property, thereby saving inheritance tax of up to £160,000 if their parents were not to survive the next 7 years.

Each case is different and requires different planning. If you would like your circumstances reviewed for free then contact us today.

Inheritance Tax – House Gift

Mr and Mrs P came to us for advice as they were worried about the potential of a large inheritance tax bill on death. They wanted to gift cash to their two children to minimise any inheritance tax payable on death. Their house was worth £450,000 and they had cash of £380,000. Without any tax planning they would be looking at an inheritance tax bill of £72,000 on death. We advised our client to gift their house to their two children and retain the benefit of using the house as their private residence. This reduced their estate to below the nil rate band and enabled the client to make regular cash payments to the children, by way of rent which is free of inheritance tax.

Remember, if you have assets such as property, cash and other investments worth £325,00 you will trigger an inheritance tax liability. Contact us today so that we can review your circumstances and protect your assets.