A 2018 YouGov poll found that, after eating better and exercising more, financial pledges were the third most popular New Year’s resolution.
As we head into 2020, here are seven New Year’s resolutions that all business owners and execs should consider…
1. Use your IHT exemptions
Using your Inheritance Tax exemptions ensures that the value of your estate is reduced, making it less likely that your beneficiaries will face an IHT bill after your death.
Many of the exemptions operate on an annual basis and so you have until 5 April 2020 to make the most of them.
Your IHT annual exemption is £3,000, meaning that you can gift up to £3,000 each year. You can carry any unused part forward one year only to the next year, so if you didn’t use this allowance in 2018/19 you could give away £6,000 before the end of this tax year.
You also have a ‘normal expenditure out of income’ exemption, which can be a hugely valuable exemption if used correctly. For this exemption to apply, it must meet three conditions:
- The gift forms part of your normal expenditure – your regular, typical expenditure
- The gift is made from income – including earned income, dividends, interest, rental or pension income
- The gift leaves you with enough income to maintain your normal standard of living
The key to using this exemption is that these gifts are consistent over a period of time. So, it’s important that you make these gifts every tax year, so you can prove to HMRC that they are regular and affordable.
If you work closely with your financial planner and accountant, you can ensure you keep clear documentary evidence of the payments in order that you can claim the exemption.
2. Get a better work/life balance
Many business owners are passionate about the success of their company. While this can ensure you trade successfully, it can have a negative impact on your health and ‘non-work’ life.
So, this January, resolve to create a better work/life balance. Here are some suggestions for how you might achieve this:
- Schedule time in your diary to do the things you enjoy and stick to that commitment
- Book a holiday. You shouldn’t feel guilty for taking time off and a break can refresh the mind and body
- Exercise as often as you can
- Spend time with friends, family and people that you care about
- Make sure you get enough sleep.
Shifting even a small percentage of your free time to yourself will have big benefits. With your mind refreshed and your body energised you’ll be an even better entrepreneur, executive or boss.
3. Maximise your pension contributions
Maximising your pension contributions each year can help you to build up a comfortable retirement income. You’ll also benefit from the tax efficiencies on offer.
Before the end of this tax year, you can contribute up to 100% of your income or £40,000. If you have yet to maximise your contributions for the 2019/20 tax year, spring is the time to ensure you use your allowances.
4. Say ‘no’ more often
As a business owner or senior executive, saying ‘no’ can be difficult. You often don’t want to say ‘no’ to a customer or a potential new client, but this can often mean that you end up doing work that is outside of your expertise, unprofitable, or that doesn’t align with your company’s specialisms or skills.
Saying ‘no’ can mean that you use your resources to attract better customers, or to invest time in the things that will genuinely improve your business.
5. Start thinking about your retirement (however far away it is)
Even if you’re years away from retirement, a great New Year’s resolution to make is to start thinking and planning for your post-work years. It means you won’t simply retire, but you’ll have something to retire to.
If you plan now to take time out of your busy schedule to involve yourself in some of the activities you want to do when you retire, you’ll start to look forward to these times. It will whet your appetite and give you a little insight into what life will be like in the future.
Many clients spend a lot of time planning for their financial future and their income in retirement but fail to plan for their life in retirement. It’s never too early to start this!
6. Learn something new
Learning a new skill adds a new interest to your life, which is an important part of achieving a good work/life balance (see above).
You might choose to learn something related to your work or your business or to take professional exams and obtain qualifications.
Or, you might prefer to learn a skill unrelated to your business. You’re never too old to learn how to improvise, dance or play the trombone!
And, depending on how you choose to learn, you may also meet new and interesting people, who may become customers, colleagues, or friends.
7. Maximise your children’s savings
With the end of the tax year fast approaching, January is also a good time to top up your child or grandchild’s savings.
You can contribute up to £4,368 to a child’s Junior ISA before 5 April 2020, either using a Cash or a Stocks and Shares ISA. No personal income tax or Capital Gains Tax is paid on any growth, and the child can take over the management of the account when they reach their 18th birthday.
Remember also that 16 and 17-year-olds are also eligible to open an adult Cash ISA. So, if your child is 16 or 17, you can actually contribute up to £24,368 into an ISA in their name before 5 April 2020.
If you’ve maximised your ISA contributions and you are thinking about additional long-term, tax-efficient saving for a child, you could consider contributing to a personal pension.
HMRC estimate that there are 60,000 personal pensions in existence for children, and you can pay in £2,880 each tax year (this is grossed up to £3,600).
Get in touch
If you want any more information about maximising your allowances and contributions before the end of the tax year, please get in touch. Email email@example.com or call 01454 416 653.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.