Financial planning for business owners & entrepreneurs

Financial planning for business owners connects your business and personal finances, because the business is usually your largest asset. It covers:

• taking profits tax-efficiently through salary, dividends and pension contributions
• building wealth outside the business, so your future doesn’t depend on a single sale
• protecting the business and your family if something happens to you
• preparing for succession, a sale and your retirement years in advance, from Business Asset Disposal Relief to what the sale proceeds need to fund.

Whether you’re growing a business or preparing to step back, it also means managing inheritance tax, now that full Business Relief is capped at £2.5 million.

For most owner-directors, it’s a mix of a small salary, dividends and employer pension contributions. Dividends above the £500 allowance are taxed at 10.75%, 35.75% or 39.35% in 2026/27, on top of the 19% to 25% corporation tax the company has already paid. Employer pension contributions are usually deductible for corporation tax and free of National Insurance and dividend tax. That often makes them the most efficient route for profits you won’t need to spend soon.

Potentially up to £240,000 in 2026/27. Employer contributions aren’t limited by your salary. They’re limited by the £60,000 annual allowance, and carry forward can add unused allowance from the previous three tax years, provided you were a member of a registered pension scheme in those years. Contributions are usually an allowable business expense if your overall pay package is reasonable for your role. Employer contributions count towards adjusted income for the taper, so model a large contribution first.

Ideally three to five years before you intend to sell. That gives you time to:

• make the business more attractive to buyers
• confirm that you and your fellow shareholders qualify for Business Asset Disposal Relief
• consider pre-sale planning, such as pension contributions while profits are high, or passing shares to family or a trust while they still qualify for inheritance tax relief.

It also gives you time to work out how much you need from the sale, which shapes the price and terms you can accept.

Yes, if you both qualify. From 6 April 2026, the relief taxes gains at 18% rather than 24% on up to £1 million of lifetime gains per person. That saves up to £60,000 each, and a couple can shelter £2 million. To qualify, each of you normally needs to have held at least 5% of the shares, voting rights and economic interest, and been an officer or employee of the company, for two years before the sale. The arrangements must be in place well before a sale is agreed.

Since 6 April 2026, 100% Business Relief applies only to the first £2.5 million of qualifying business and agricultural assets combined. Value above that gets 50% relief, which is an effective inheritance tax rate of 20%. Unused allowance can pass to a spouse or civil partner, and the tax can be paid in ten interest-free annual instalments. For a £6 million business owned by one person, the value above £2.5 million could face around £700,000 of inheritance tax if no other allowances are available.

Take your time before making big decisions. Once the business is sold, the cash no longer qualifies for Business Relief, so your estate may suddenly face 40% inheritance tax. Typical priorities are:

• keeping the money safe while you plan, spread across banks, as FSCS protection is £120,000 per person per banking licence
• using pension and ISA allowances
• investing the rest in line with a clear plan
• reviewing gifts and trusts.

We’ll also help you decide what comes next, whether that’s retirement, a new venture or philanthropy.

First, decide how much the business needs for working capital and a sensible reserve. Beyond that, the options include employer pension contributions, investing within the company, paying dividends or setting up a separate family investment company. Be careful with large investment holdings. For Business Asset Disposal Relief, HMRC generally treats non-trading activity of more than 20% as substantial. Surplus investments can also reduce Business Relief on death. We’ll strike the right balance with your accountant.

It can be very tax-efficient. A SIPP or small self-administered scheme (SSAS) can buy commercial property and lease it to your business. The company pays a market rent, which is usually tax-deductible, and your pension receives it tax-free. Growth in the property’s value is also free of capital gains tax inside the pension. The drawbacks are concentration risk, limits on borrowing, and complications when you retire or sell the business. From April 2027, unused pension funds, including property, will count towards your estate for inheritance tax.

The most important cover is usually:

• shareholder protection, backed by a cross-option agreement, so co-owners can afford to buy a deceased shareholder’s stake
• key person insurance, to protect profits if someone critical dies or falls seriously ill
• relevant life cover, a company-paid life policy for directors that’s usually tax-deductible and not a taxable benefit.

Without these, your family could end up owning part of a business they can’t control, while your co-owners can’t afford to buy them out.

Often, yes, but timing is critical. A gift of shares in an unquoted trading company can usually qualify for Business Relief from inheritance tax, and holdover relief can defer capital gains tax, so there’s usually no immediate tax. Made before a sale is agreed, the gift can move future growth and sale proceeds out of your estate. However, Business Relief on a lifetime gift can be lost if the shares are sold and you die within seven years. Gifting through a trust can give more control. This needs close coordination with your accountant and solicitor.