Running a successful business takes time, commitment, hard work and determination.

This means that owners have little time to think about their own financial objectives, or the protection of the business they have created.

As a result, planning your own and your employees' financial security becomes neglected or often completely overlooked.

As a director, it is important to look after your own increasingly complex personal financial affairs.

Careful planning is key to ensuring financial security over the longer term, and advice from a wealth management specialist can help you meet your aims while concentrating on managing the business.

Auto-enrolment

As a company director or business owner, it is your obligation to understand what a Qualifying Scheme is, the process and how it works, and what duties and obligations you must comply with.

From April 2019, employer contributions are a minimum of 3%, and member contributions are at least 5% (this receives basic rate tax relief), making a total of 8%.

It may be a good idea to seek help in understanding the issues and requirements of workplace pensions and guidance to ensure your business complies with the rules.

The value of a pension will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time.  The value of any tax relief depends on individual circumstances.

Corporate Planning

The death or serious illness of a key director or employee can have far-reaching or even disastrous consequences for a business.

It can result in:

  • loss of profits
  • the recall of loans
  • reduced capacity
  • loss of key clients/contacts
  • loss of essential or specialist knowledge.

Having the correct insurances in place and making sure that they are regularly reviewed as your business changes can be a particularly onerous task.

It’s good to undertake an in-depth review of your business and work to implement a tailored insurance programme to help protect your business from a wide range of risks.

Shareholders

As a shareholder, your focus is on making your business successful; but if you were to die, would your beneficiaries share the same ambitions?

Your fellow shareholders may have to work with partners with little or no interest in the business and your beneficiaries will own shares with no ready buyers.

Take advice to identify your requirements and discuss potential solutions that will provide your fellow shareholders with the means to purchase your shares and allow your beneficiaries to realise the market value of your shareholding.

Employee Benefits

Having an effective benefits and remuneration strategy that is clearly communicated and appreciated by your employees can really help you to recruit and retain high calibre employees.

Having an adviser spend the time to fully understand your business, before creating a cost-effective strategy can really help everything run smoothly.

This advice you need may include:

  • online total reward statements - helping your employees to understand and appreciate the cost of the benefits you provide
  • flexible benefits - allowing employees to create a benefits package that meets their own individual needs, enabling you to respond flexibly to the requirements of potential recruits
  • salary sacrifice arrangements - offering employee access to tax efficient benefits whilst reducing employers' National Insurance costs
  • private medical insurance - ensuring your employees' health and well being and reducing their absence from work
  • group life, income protection and critical illness - important benefits that not only form a key part of a comprehensive employee benefits package but also enable you to manage your business more effectively by:
    • providing you with the means to financially support your employees and their families at a particularly difficult time
    • allowing you to recruit temporary employees
    • providing access to a range of rehabilitation services, employee assistance programmes and absence management services that meet your statutory obligations and manage your employee absence more effectively.
The levels and bases of taxation, and reliefs from taxation, can change at any time.  The value of any tax relief depends on individual circumstances.

Corporate Pensions

If you are running a successful business, how can you use that to generate financial security in retirement?

There is a range of solutions that will provide yourself and your employees with tax efficient retirement benefits.

  • Group pension plans - these are both an attractive recruitment tool as well as a justifiable business expense
  • Salary sacrifice arrangements that provide cost effective pension planning opportunities for employees while reducing employer National Insurance costs
  • Executive pension arrangements enabling you and your family to reap the rewards of your business
  • Trustee based arrangements, offering a cost effective solution for transfer of scheme liabilities to a new pension arrangement - thereby securing employee pension rights

It’s crucially important to take the informed advice of someone who can recommend a solution that will enable you to benefit from the success of your business.

The value of a pension will be directly linked to the performance of the funds selected and may fall as well as rise.  You may get back less than the amount invested.

Tax Mitigation

Nobody wants to pay any more tax than they need to. There are simple steps a company owner can take to reduce their Corporation Tax liability which are acceptable tax mitigation and not illegal tax evasion.

Some of the main points to consider are:

Company pension contributions

The contributions a company makes to a pension scheme are usually fully allowable in calculating the profits chargeable to Corporation Tax.

Remuneration strategy

It is important that you regularly review how you draw income out of your company. It is worth considering reducing the salary to a level where you can still claim state benefits, and then maximise the use of dividends. Paying a dividend does not attract National Insurance contributions and has no tax consequences for your company.

Claiming Allowances

It is essential that a company claims all available allowances to reduce corporation tax; the main allowances that are either not, or only partially, claimed are Research and Development Relief and Capital Allowances. It is worth obtaining expert advice on these areas to ensure you receive all the allowances you are entitled.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.  

Exit Strategy

Many business owners put in a lifetime of hard work building their business, only to throw away some of the rewards by failing to consider properly how they will exit from the business – both financially and as the owner.

Sound management over several years will add value to your business and allow you to exit relatively quickly when the time is right. The main areas you may need to focus on could include:

  • Aim for a year-on-year increase in profits – reducing profits to cut Corporation Tax liabilities may make short-term sense but it could harm your business’s perceived value.
  • Make sure your accounts are in order and up to date and give a true picture of the business – it pays to be ready for any due diligence you may have to go through later.
  • Expand your range of customers and suppliers – over reliance on a few key customers will undermine your business’s value.
  • Client Retention - aim to tie key customers, suppliers, staff and managers into long-term contracts.
  • Maximise your relief for Capital Gains Tax (CGT) – you may be able to claim Entrepreneurs’ Relief which reduces the effective rate of CGT. Consider avoiding substantial holdings in property, shares or leaving money in the bank which may disqualify you from this relief.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances. 

Exit Strategies may include products and services that are separate and distinct to those offered by St. James's Place.

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St. James's Place guarantees the suitability of the advice given by members of the St. James's Place Partnership when recommending any of the wealth management products and services available from companies in the group, more details of which are set out on the Group's website.