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  • Writer's pictureMike Evans

Case study - James' Year Off

Updated: Aug 19, 2019

To most people, this graph doesn’t depict a healthy business. The consistent turnover and profits have plummeted to the point where we’re currently seeing a loss in 2018/19 with £0 turnover. This is however, a business that we feel is very healthy because this is data from James’ company. We’ve been working with James for almost 8 years now and in 2018, he simply took a year off to travel the world. We’d all like to travel more and stepping away from work can often help you to gain perspective on your career, re-energise you and generally make you a happier, healthier person. For a small business like James’, that can only be a good thing.

James came to us as a Product Design Engineering consultant in 2011 having recently set up his own company. He consistently turned over £60-70k, making around £35k of profit after paying himself a tax-efficient salary and contributing a chunk of money into his pension. Like many contractors, he wasn’t looking to grow a multi-million-pound business employing hundreds of people, he simply liked the freedom and flexibility of working through a limited company rather than dealing with the restrictions of having a permanent job. In 2017, with his first child on the way, James decided to take his freedom to the next level and planned a year of travelling the world without working while maintaining his income.

It almost sounds too good to be true but we’ve worked closely with James over the past few years to not only ensure his taxes are paid and his bookkeeping is up to scratch but also to build the reserves in his business to a point where a full year off was a real possibility. Through an annual tax planning exercise, we were able to keep James just under the higher tax threshold so his tax bill was kept to a minimum and the companies reserves grew to a stage where he could continue to take out a monthly salary and a quarterly dividend for over a year without working a day.

As a result, despite taking 2018 off, James took home over £40k in the 2017/18 tax and we expect this to increase in 2018/19. This allowed him and his young family to do everything from driving around France in their custom camper van to backpacking across Indonesia and Australia to relaxing on the beaches of Barbados.

We didn’t use any risky tax schemes to help James, we just like to give our clients good service and find out what they really want to achieve. Scenarios like this are exactly why we work love to work with contractors, consultants and freelancers. We always include an annual face to face meeting, unlimited telephone and email support and FreeAgent software that allows us to see an up to date picture of the business. This means we can help our clients achieve their goals rather than just producing a set of accounts based on old data and giving them a tax bill at the end of the year.

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