Financial advice for business owners

Salary. A modest salary — usually set around the National Insurance threshold — preserves your state pension record and is deductible for corporation tax, without triggering significant employee or employer NI.

Dividends. Paid from post-corporation-tax profit and taxed at dividend rates, with no National Insurance. The efficient amount depends on your other income and where it places you across the tax bands.

Employer pension contributions. Normally an allowable business expense, free of National Insurance and dividend tax. For many owners this is the single most efficient way to move money from the company to themselves — the trade-off is that it is locked until at least 55, rising to 57 from April 2028.

Timing across tax years. Because you control when dividends are declared, you can smooth income across tax years to avoid the marginal-rate cliffs — the loss of the personal allowance, the child benefit charge, or the tapered annual allowance.

How much does the business need to deliver?

Our free retirement calculator works backwards from the income you want to the pot you need, so you can see what the exit actually has to achieve.

Most owners have the large majority of their net worth in one company, in one sector, dependent on their own continued involvement. That is a concentration risk no adviser would recommend if you were choosing it deliberately.

• Pensions — tax relief on the way in, growth free of UK income and capital gains tax, and creditor-protected separately from the business.
• ISAs — no tax relief going in, but tax-free growth and complete flexibility on access.
• General investment accounts — for anything beyond those allowances, using the CGT and dividend allowances each year.
• Cash reserves — enough personally that a bad trading year does not force you to sell investments or take income at a poor time.

The aim is a point where the business becomes optional rather than essential — which usually also improves the price you can command when you sell it.

Shareholder protection

Funds the surviving shareholders to buy a deceased or critically ill partner’s shares, so the family gets fair value in cash and the business is not suddenly co-owned by people with no role in it. Needs a cross-option agreement alongside the policy.

Key person cover

Pays the company a lump sum on the death or serious illness of someone the profits genuinely depend on, buying time to recruit and stabilise.

Relevant life cover

A death-in-service style policy for a small company, normally paid for by the business as an allowable expense and written in trust for the employee’s family. Usually cheaper in net terms than personal life cover for a director.

Executive income protection

Cover arranged and paid for by the company that replaces a director’s income during long-term illness, with the premiums normally deductible for the business.

The exit is where the value in the business finally becomes personal wealth, and almost all the planning that improves the outcome has to happen years beforehand:

• Business Asset Disposal Relief has qualifying conditions around shareholding, voting rights and employment that need to be satisfied for a minimum period before a sale.
• A sale to an employee ownership trust can be free of Capital Gains Tax where the conditions are met — worth comparing against a trade sale on an after-tax basis.
• Business relief may reduce inheritance tax on the shares while you hold them, but not on the cash once you have sold.
• Using pension carry-forward in the year of sale can shelter a meaningful amount of income taken around the deal.