Why Business Owners Need Professional Financial Advice

As a business owner, you’re likely focused on growing your company and ensuring its success.

While many entrepreneurs rely on accountants to manage the financial aspects of their business, the importance of professional financial advice often gets overlooked. This can lead to missed opportunities that could enhance both your business and personal financial wellbeing. Let’s explore four critical areas where financial advice can make a significant difference.

Key Insights

💼 Maximise Pension Opportunities: Use strategies like carry forward rules and commercial property investment in pensions.

💸 Optimise Remuneration: Tailor your income strategy to minimise tax and maximise benefits.

🛡️ Protect Your Business: Implement key-person insurance and shareholder protection for business continuity.

🏠 Build Personal Wealth: Align business success with personal financial security through effective planning.

Why Business Owners Shouldn’t Overlook Financial Advice

As a business owner, you’re likely focused on growing your company and ensuring its success. While many entrepreneurs rely on accountants to manage the financial aspects of their business, the importance of professional financial advice often gets overlooked. This can lead to missed opportunities that could enhance both your business and personal financial wellbeing. Let’s explore four critical areas where financial advice can make a significant difference.

Maximising Pension Opportunities

Pensions are a powerful tool for business owners, offering more than just a way to save for retirement. While you might already be aware that employer pension contributions reduce your corporation tax liability, there are other opportunities that a financial adviser can help you tap into.

One such opportunity is the carry forward rule. This rule allows you to use any unused annual pension allowance from the previous three tax years, enabling you to contribute more in profitable years. This is especially useful if your business profits fluctuate or if you’ve reinvested profits back into your business instead of paying yourself.

Another strategy is purchasing commercial property within a pension scheme. Through self-invested personal pensions (SIPPs), you can buy commercial property and rent it out to your business. The rental income contributes to your pension pot without being subject to income tax, and any capital growth on the property is free from capital gains tax when sold. This approach not only boosts your pension but also offers a tax-efficient way to reinvest in your business.

Optimising Remuneration Strategies

While accountants are usually the go-to for remuneration strategies, a financial adviser can provide a more comprehensive approach, particularly if your accountant focuses mainly on bookkeeping. Understanding how your personal income interacts with your business finances is crucial, especially for higher earners.

For example, in the 2024/25 tax year, if your income exceeds £100,000, you begin to lose your personal allowance. For every £2 earned above this threshold, you lose £1 of your personal allowance. Without careful planning, ad-hoc dividend withdrawals could push your income over this limit, leading to unexpected tax liabilities.

Another strategy is employing family members in your business. Paying a market-value salary to a family member for work undertaken within the business not only reduces your corporation tax liability but also provides a tax-efficient way to fund expenses like university fees.

Protecting Your Business and Family

Building a successful business requires dedication and hard work. However, without proper protection, unforeseen events can jeopardise everything you’ve built. Financial advice can help ensure that your business and family are safeguarded against such risks.

Key-person insurance is essential for protecting your business in the event of the death or critical illness of a key employee or director. This policy provides a payout that can help your company continue operations or recruit a replacement.

Relevant life cover offers a tax-efficient way to provide term assurance for both yourself and your employees. By arranging it through the business, it becomes a tax-deductible expense, benefiting both the company and the individuals covered.

Another critical area is shareholder protection insurance. This ensures that, in the event of a business owner’s death, the remaining shareholders can afford to purchase the deceased owner’s shares, ensuring business continuity. This is often combined with a shareholder agreement that legally obliges the sale and purchase of shares under specific conditions, safeguarding the business’s future.

Aligning Business Success with Personal Wealth

It’s not uncommon for business owners to have most of their wealth tied up in their business, leaving personal finances underdeveloped. Professional financial advice provides a holistic view, helping you align your business success with personal financial security.

Cashflow modelling is a key tool in this process. It allows you to scenario plan and allocate income to pensions or other investments confidently. This planning is crucial not only for your retirement but also for ensuring you have the necessary funds when transitioning or exiting your business.

In essence, financial advice isn’t just about managing your business finances; it’s about creating a comprehensive strategy that covers both your business and personal wealth. By considering how your business decisions impact your personal financial goals, you can build long-term financial resilience.

Final Thoughts

As a business owner, your focus is naturally on the growth and success of your company. However, without professional financial advice, you may be missing out on opportunities to optimise your finances, protect your business, and build personal wealth. The value of financial planning extends beyond your business’s lifespan, ensuring that you and your family are financially secure well into retirement.

At Strategic Wealth Partners, we understand the unique challenges business owners face. Our team is here to help you navigate these complexities and ensure that both your business and personal finances are aligned for long-term success. Don’t overlook the benefits of financial advice—invest in your future today.

For a more detailed discussion on this topic, please feel free to contact us. Our team are always available to answer your questions and to help you with any of your financial planning needs. Here’s what we offer: A cup of coffee… and a second opinion.

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