Financial Advice for Business Owners - Heritage Financial Planning

Financial Advice for Business Owners

We aim to simplify the financial challenges you face, by creating and protecting your wealth for you and your loved ones.

We get it, running your own business is hard and can take up all of your focus. It’s normal for your business affairs to have been prioritised over your personal affairs and they may even be neglected.

We can help work with you to create a plan that can create, grow and protect your wealth into the future.

We can specifically help with the following:

Retirement Planning

Although you may be extremely passionate about your business, you may have one eye on a well earned retirement or you may wish to still be involved but reduce your days. Saving for retirement may have taken a back seat as you built the business or reinvested the profits back into the business.

Using the latest cashflow modelling software, we can work with you towards building a financial plan to work towards achieving your goals and maintaining your standard of living in retirement.

Integrating financial planning with investment management, we can look to create, grow and protect your money as tax efficiently as possible.

If you are a director of your limited company, the business can contribute up to £40,000 per year into your pension which can be offset against your Corporation Tax. If your spouse is working in the business, the business can again make a contribution on their behalf which can also be offset against Corporation Tax. This assumes both contributions meet the ‘wholly exclusively’ test.

Tax Efficient Investing

If you have sold your business or the success of your business means you are looking to invest some of the profits as tax efficiently as possible. Perhaps you have utilised you and your spouse’s pension and ISA allowance and are wondering where to turn.

We can consider a number of tax efficient investments which include Venture Capital Trusts (VCT’s) and Enterprise Investment Schemes (EIS’s). These come with a number of tax benefits such as income tax relief and tax exemptions.

Some of the features and differences of these include:

ComparisonEISEIS
Tax Relief30%30%
Holding Period3 Years5 Years
DividendsTaxableExempt
Capital Gains TaxExempt After 3 YearsExempt
Capital Gains Deferral ReliefYesNo

Investing in EIS and VCT involves investing in smaller unquoted shares which, although have the potential for significant returns, are higher risk and may be difficult to sell.

Mortgages for business owners

As a business owner your renumeration may be made up of salary and dividends for maximum tax efficiency.

Although this may reduce your tax bill, it can make getting a mortgage and the amount you wish to borrow more difficult and lower than if you were employed. If you are looking to move home or remortgage, then get in touch with us as we have specialist knowledge of working with the self employed and getting them a mortgage.

Protection for you and your business

Protecting the ownership of your business

If you or your business partner(s) dies, this can cause untold issues for your business

When a shareholder dies, then their stake of the business is likely to pass directly to their descendants. This could mean a spouse or child retains ownership of a business that they have little knowledge of or interest in.

It can also cause issues as the surviving spouse or partner may want to be renumerated for their share of the business, but the business cannot afford to buy the shareholding.

Share protection and a share purchase agreement known as a ‘cross option agreement’ can help to protect against this scenario occurring by agreeing what happens before the worst happens and as it is an insurance, can provide the funds to meet the capital requirement.

Insuring key employees

If somebody is particularly instrumental to your business such as the Head of Sales, if they became ill or died, this could weaken or hamper your business in the following ways:

  • Loss of profits or sales.
  • The cost of finding a replacement.

You can insure this risk by identifying your key employees and taking out insurance to them which is known as Key Person Protection

This is a form of life insurance and/or critical illness cover. The business pays the premiums and if the insured person dies or becomes critically ill, the policy will pay out.

Usually the premiums are again an allowable expense which can be offset against corporation tax.

Protecting your family

You can take out an insurance policy that can protect your family should the worst happen to you. This is known as a ‘Relevant Life’ plan or ‘Death in Service’. If the insured person dies, then your family can receive the payout.

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We are a family run business of Independent Financial Advisers, that specialises in providing trusted advice from navigating retirement and optimising your income, through to buying your first home. You will always be treated as a person and not a number, with many of our clients having been with us for decades.