Accounting for high net worth individuals: what a specialist accountant does

Accounting for most people means one tax return a year and a set of accounts if there is a business. For a high net worth individual it is a different job. The wealth sits in several places, the income comes from several sources, and each decision, from a sale to a gift, has consequences in more than one area of tax. The accountant's job is no longer to record what happened but to see the whole picture and keep it in order.

This guide explains what accounting for a high net worth individual involves, how to tell when ordinary accounting has been outgrown, and what to look for in a specialist.

What "high net worth" means for your accounts

The phrase has no single definition. Industry reports usually mean someone with investable assets above a seven-figure sum, and an ultra high net worth individual is someone with a much larger fortune. The UK financial regulator has its own, different tests for particular purposes, such as who may be sent certain investment promotions.

For accounting, the figure matters less than the shape of the wealth. Two people with the same net worth can need very different things. One holds a portfolio at a single bank and a house. The other holds shares in three companies, a partnership interest, a let property portfolio, a trust, some private funds and a second home abroad. The second needs a specialist; the first may not.

The areas a specialist covers

A specialist accountant for a high net worth individual works across six areas, and the value lies in treating them as one.

• Personal tax. The self assessment return, with every source of income and gain brought together: employment or director's pay, dividends, rent, interest, partnership profits, and gains on shares, property and funds.
• Companies and partnerships. Accounts and tax for the companies and partnerships you own or control, prepared with your personal position in view, because what a company pays affects what you pay.
• Property. Rental income, development, and the tax on buying, holding and selling, including the structure the property is held in.
• Investments. Reporting across banks, managers and funds, and the tax records needed for each, including private funds that issue their own documents.
• Trusts and estates. Accounts and returns for trusts you set up or benefit from, and the planning that sits alongside them with your solicitors and trustees.
• Residence and cross-border affairs. Where you are resident for tax, where your income and assets are, and what that means, planned against the rules as they stand and revisited when they change.

Signs you have outgrown ordinary accounting

Ordinary accounting stops being enough in recognisable ways:

• Your tax return needs more than a few pages of supporting schedules.
• Your income arrives from companies, partnerships, rent and investments, rather than one source.
• You own or control more than one company, or a company and a trust.
• You are about to sell a business, receive an inheritance or make a large gift.
• You have assets or income in more than one country.
• Your solicitor, banker and accountant each have part of the picture and none has all of it.
• You cannot easily say what you are worth, or what you earned, without asking several people.
• A tax or compliance deadline has been missed or nearly missed.

If several of these are true, a specialist is worth a conversation. The cost is usually weighed against the cost of a missed deadline, a missed relief or a decision made without the full picture.

What a good specialist relationship looks like

• One senior contact. A named adviser who knows your affairs and answers for the advice, with a team behind them.
• A calendar, not surprises. A plan for the year: what is due, what needs a decision before a date, and when you will hear from your accountant.
• Planning ahead of events. Advice before a sale, a gift, a purchase or a move, while there is still time to choose, not after the transaction.
• Coordination. Your accountant works with your solicitors, trustees, bankers and wealth managers, agreeing who does what and sharing the right figures.
• Reporting you can read. A clear, consolidated view of your wealth and income, with the supporting detail available when you want it.
• Confidentiality. Your affairs are discussed only with the people you name.

Questions to ask before you appoint one

1. How many clients with a similar structure to mine do you act for?
2. Who will be my contact, and who covers when they are away?
3. Will you work alongside my solicitors and other advisers?
4. How do you handle private funds, trusts and overseas income?
5. Which regulatory body supervises you, and what insurance do you hold?
6. How will I see my overall position, and how often?
7. How are your fees set, and what is outside the fee?
8. How would you take over from my current accountant, and when?

From private client to family office

For many people the specialist accountant is the first step. As wealth, entities and people multiply, an informal arrangement turns into a family office: a function that also oversees investments and household affairs and holds the records for the family. Our guide to what a family office is explains the models and how to tell when a family is ready, and our guide to outsourcing family office finance describes how an accountant can run the finance side of one. Families who want to hold investments together in a company can read our guide to family investment companies.

How Tributom Advisory works with high net worth clients

Tributom Advisory is an ICAEW-regulated practice. For high net worth individuals we provide accounting, tax and consolidated investment reporting from one team, and we work alongside the solicitors, trustees and wealth managers you already have. We can take over from your current accountant mid-year and manage the handover with them directly.