Tax & business

Taking income in the wrong form. The mix of salary, dividends and employer pension contributions determines your effective tax rate. The optimal split moves whenever thresholds, corporation tax or dividend rates change, so a structure set up years ago is rarely still the best one.

Under-using the company pension. Employer pension contributions are normally an allowable business expense and avoid both National Insurance and the dividend tax that extracting the same money would attract. Carry-forward can allow considerably more than the standard annual allowance in a single year.

Holding surplus cash in the company indefinitely. Large cash balances earn little, and can put business relief for inheritance tax at risk if the company starts to look like an investment vehicle rather than a trading one.

Leaving the exit unplanned. Most of the tax planning that improves a sale has to happen before a buyer is found. Owners who start the conversation once a deal is on the table have already lost most of their options.

Check whether you are on track

Our free retirement calculator shows what your pensions and expected business proceeds will actually support — the number most owner-managers have never seen.

Paying yourself and personal tax

Getting the salary and dividend mix right, claiming the pension relief you are owed, and filing a self-assessment return that reflects the planning you have done.

Building wealth outside the business

Most owners have too much of their net worth tied up in one illiquid asset. Pensions and ISAs diversify that risk with tax relief attached.

Succession

Deciding who runs and owns the business next — family, a management team, an employee ownership trust — and preparing both them and your own finances for it.

Selling

Valuation, buyer types, due diligence, Business Asset Disposal Relief, and what the proceeds need to do for you afterwards.

The two roles are complementary and neither substitutes for the other. Your accountant reports what happened accurately and on time. A financial adviser plans what should happen next:

• Modelling how much you need personally, and therefore how much the business has to deliver and by when.
• Structuring pension and investment contributions to reduce your marginal rate while diversifying away from the company.
• Coordinating the exit with your retirement income and your estate plan, rather than treating the sale as the end point.
• Making sure protection is in place — shareholder protection, relevant life cover, key person cover — so the plan survives an unexpected event.