If you have been working hard to grow your business and are starting to reap the rewards, it is wise to make the time to consider your own personal finances. For most business owners, personal wealth is directly linked with business success, which means decisions made inside the company can impact life outside of it.
If your business is young, or you’ve never before given it thought, it is wise to take advice on the most tax efficient way to pay yourself, and how to protect the wealth that you accumulate. A financial plan, taking in both business and personal assets, is vital.
An independent financial planner will help you create that plan, but it’s also good to involve your company’s accountant, and speak to fellow business owners to learn how they’ve approached things and whether that approach has been successful.
How to extract funds from your business
There are various different ways in which you can extract profits from your business in order to fund your personal life.
It is important that if you take dividends, you bear in mind that these are considered earnings, on which you are liable for personal tax on anything over the tax-free dividend allowance of £2,000.
A good way to protect your wealth for the future is to pay into a pension, and you can do this via company funds.
This is usually a tax-efficient way of extracting profit from the business, and can be a wise way to plan for the future.
If your business has had a good year financially, you may be able to take advantage of carry-forward rules and pay more than the annual allowance into your pension. This will allow you to use any unused allowance from the previous three years in the current year.
If you are exiting your business, protecting your wealth is vital, and you will need specific advice in this respect.
A lot of business owners are of the opinion that when the time comes to retire, they’ll be able to sell their business to fund their retirement. However, this is not always the case, so it is important to make pension arrangements and to take retirement planning advice from an independent specialist.
The importance of independent financial advice for business owners
Every business is different, and individual circumstances vary too. This is precisely why taking independent financial advice is crucial when it comes to how to protect your wealth, and choosing an adviser with experience and expertise in both business and personal finances is essential. The adviser can also liaise with your accountant to make sure all angles are covered, and that you are optimising the tax relief opportunities that are open to you.
Knowing that you are running your business in the most tax efficient way so that your personal finances benefit provides the ultimate reassurance as a business owner.
Strategic planning is also important so you can figure what you’ll need for the retirement you want, when you want it, as well as any inheritance you’d like to leave.
Here at Partridge Muir & Warren, we have an in-house team of tax advisers, financial planners and legal specialists ready to provide you with the advice you need to reduce your costs and maximise your income.
To learn more about how we can assist you, please get in touch.