06-06-2025
- Business
- The Herald Scotland
Shape your business to work for you and avoid unexpected challenges
In the early phases of a business, cashflow modelling offers a clear vision for future growth and exit strategies.
By forecasting financial performance, owners can optimise tax efficiency and strengthen retirement assets such as pensions and ISAs.
Protection is another vital aspect – businesses should prepare for unexpected challenges. Loss of a key employee due to illness or death can significantly impact operations.
Implementing business protection policies safeguards financial stability and ensures continuity.
Once a business generates substantial profits, owners must prioritise tax-efficient income extraction.
Many directors opt for a small salary with dividend payments, but rising dividend tax rates make pension contributions an attractive alternative.
Employer pension contributions can typically be offset against corporation tax, leading to significant savings.
The generous £60,000 annual pension allowance allows owners to set aside substantial amounts each year, with options to carry forward unused allowances from the previous three years.
Planning an exit strategy is key to securing financial benefits when transitioning out of a business.
Business Asset Disposal Relief (BADR) – formerly Entrepreneur's Relief – enables UK business owners to access a reduced 10% capital gains tax rate when selling qualifying assets.
Potential exit strategies include:
■ Management Buyout – Selling to current employees ensures continuity.
■ Mergers & Acquisitions – Partnering with another business for a seamless transition.
■ Family Succession – Transferring ownership to younger family members, with gifting options that minimise inheritance tax exposure.
Early preparation helps owners identify the most tax-efficient approach for a successful exit.
Working with a financial planner provides business owners with tailored strategies to enhance financial security and maximise tax-saving opportunities.
This is particularly important given recent reductions in dividend allowances and the increase in corporation tax from 19% to 25%.
By optimising wealth-building efforts and protecting assets, business owners can ensure a smooth journey through every stage of their company's life cycle.
A study by Vanguard in 2022 highlighted that people who take specific financial advice were likely, on average, to receive between 3% and 4.4% more per annum in net returns.
That was due to a combination of financial planning, preventing behavioural mistakes, rebalancing portfolios, and tax advice.
Schedule a free consultation with Blackmount Private Wealth now to discover how we can help you achieve your investment goals.
