Retiring as a partner

Three key points to be aware of

The time has come where you have decided to retire from your firm and are now looking to understand what comes next. When leaving your role there are a number of things you will need to consider and understand.

Retirement from the firm

The date you choose to retire could have an implication on your final tax liabilities, so it is important to consider when the right time may be. If your firm has a 30 April year end it could make more sense to retire on this date and delay your final tax payments.

Example: if your firm’s year end is 30 April 2023 and you choose to retire on this date, your final payments would be due in January 2025, whereas if you retired on 31 March 2023 the final payments would be due 12 months earlier in January 2024.

It is also important to be aware of when your capital will be repaid. You may be making plans on how to spend this so you will need to know when the funds will come back to you. There are many different options that firms use which could mean you receive a one-off payment shortly after retiring or you may receive the funds in tranches over a number of years.

Lastly, think about how your tax reserve is being dealt with. It is good practice to work with your finance team to ensure the remaining balance is sufficient to cover your final liabilities. You do not want any surprises so if there is a shortfall, advance warning would be helpful.

It may be that there are funds left in your reserve once the final payments have been made. Are you aware of when these will be paid over to you?

Your next role

Having spent most or all of your career in a similar role, now is the time to consider what comes next and there will certainly be a number of options available to you.

Continuing at your current firm in a consultancy role would enable you to wind down while still ensuring a there is a good handover with your clients.

Taking up a non-executive director role with a previous client or contact would enable you to continue providing valuable advice but perhaps in a more informal manner.

If you are looking to move away from your traditional day-to-day work then perhaps volunteering or simply spending more time on your hobbies is the right thing for you.

Funding your retirement

You will have no doubt been saving towards your retirement for a while now and making plans with your IFA or tax adviser. Now is the time to decide how to start drawing down your income and capital.

Having a solid plan in place will ensure that you are able to receive income in a tax efficient manner by utilising your basic rate, savings and dividend allowances as well as your capital gains tax exemption.

For more information on the issues discussed in this article or to discuss your individual circumstances, get in touch with Ben Carter or your usual Crowe contact.