Being a business owner is very different to being an employee.
Your personal and company finances are deeply intertwined, and a lot rests on your shoulders (e.g. other team members’ jobs). Financial planning is vital, but you cannot simply look at your pensions, savings and investments.
You also need to consider business planning, succession planning and how to extract value sustainably and tax-efficiently.
Below, our Grantham financial advisers explain some of the key opportunities and challenges for business owner wealth planning. We’ll offer ideas on how to stay ahead in 2025, protect your assets and ensure business continuity.
As a business leader, it is easy to get fixated on the company accounts - the day-in, day-out revenue and spending. However, if your focus is purely on your next few steps, you risk losing sight of the bigger picture.
What does retirement look like for you? What might it look like to “hand over the reins” to someone else in the future? How do you protect your assets (both corporate and personal) in the event of “disaster”?
Being an owner is certainly challenging. You might face income volatility as profits fluctuate (affecting your ability to draw) - making it hard to budget, save or even underwrite a mortgage.
Owners also typically face a wealth concentration risk, with a large chunk of their assets held in their company. This can leave the owner vulnerable if a regulation changes, a supplier fails, a competitor enters your space or a key client walks away.
Wealth planning helps you plan for these scenarios. For instance, a financial planner can:
The overall setup of your business matters. The two main options are self-employment (sole trader) and a limited company. The right choice will vary depending on an owner’s unique goals, needs and circumstances.
What was “right” for your business before may not be true forever. Life changes could make a different structure more appropriate.
For instance, sole traders typically enjoy simplicity, flexibility and ease of setup. However, a self-employed person might consider setting up a limited company if they want to pursue certain tax advantages (or gain more liability protection).
One benefit of working with a financial planner is that they periodically review whether your current structure still fits your goals. If your profits grow, you expand overseas or succession planning comes to the fore, it might be time for a rethink.
A pressure issue is how you pay yourself as an owner. One advantage of limited companies is that directors can take a salary and/or dividends. By occasionally rebalancing the two, a director can steer their income more efficiently towards certain goals:
UK corporation tax changed in April 2023, rising to 25% on profits exceeding £250,000 (below that, a 19% rate applies). This is important for owners when deciding on whether to retain profits for growth or extract them.
One important consideration is Entrepreneurs’ Relief (now Business Asset Disposal Relief). If too much cash is built up in the company due to reinvestment, this could lower an owner’s ability to claim this relief in the future for inheritance tax (IHT) mitigation.
It’s also worth noting some upcoming changes to Business Relief. From 6 April 2026, 100% BR will be capped at £1m per person. Above that, 50% IHT relief will be available on qualifying business assets (an effective IHT rate of 20%).
This is a complex and evolving area of tax planning, but there is still time to prepare. Consider seeking independent financial advice to discuss your options for you and your business.
There is far more we could cover on this key topic of wealth planning for business owners. However, this article should give you enough inspiration for when you talk to an adviser!
If you’d like to make sure you’re taking the right steps to maximise your financial position as a business owner and safeguard your financial future, please get in touch.
Your capital is at risk. Investments can go down as well as up, and you may not get back the amount you originally invested. Past performance is not indicative of future results. Diversification does not guarantee profits or fully protect against losses. Tax treatment depends on individual circumstances and may change in the future. This content is for information only and does not constitute personal financial advice. Readers should seek independent financial advice before making any investment decisions.
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