Key personal planning priorities for every business owner

Taking a proactive approach to personal financial planning will enable business owners to build greater financial resilience, create more flexibility for the future and ensure that the wealth they create through their company translates into long-term financial security. 

The six key personal planning priorities are:

1. Remunerate yourself tax efficiently
2. Build a ‘Plan B’ pot outside of the business
3. Maintain a personal emergency reserve
4. Protect against disaster
5. Consider your succession plan early
6. Seek professional advice

1. Remunerate yourself tax efficiently

Generating profits is only part of the equation. Converting those profits into personal wealth efficiently is equally important.

There is no one-size-fits-all solution when it comes to remuneration planning. The most appropriate strategy will depend on factors such as:

• Profitability of the company
• Personal spending requirements
• Existing income sources
• Shareholding structure
• Future retirement plans
• The wider family situation

Having a detailed understanding of these factors will allow your advisers to calculate the most efficient strategy for you, your family and shareholders, based on the following profit extraction methods:

Salary and/or dividends

Historically, a small salary (to build state pension entitlement) with remaining income drawn by way of dividends was seen as the default choice for owner-managed companies. Whilst this method continues to be most tax-efficient in some circumstances, increases to dividend taxation, corporation tax rates and employer National Insurance costs mean the advantage over salary is not as clear cut as it once was.

Pension contributions

Despite unused pension funds being brought within the scope of IHT from April 2027, pension contributions remain one of the most powerful tax planning opportunities available for business owners. Provided they meet the relevant requirements, employer contributions receive corporation tax relief, effectively moving company revenue into your own name without any tax leakage.

Of course, the downside of pensions is that the funds cannot be accessed until pension age, which will increase from 55 to 57 in April 2028.

With the new IHT legislation bringing an end to pensions being used as a legacy planning tool, the emphasis is now on extracting pension funds tax efficiently throughout retirement.

Business owners should also be aware of the full range of permitted investments within pensions, which include the ability to own commercial property, including those from which your company operates. In some cases, this can provide a further way to move business profits into personal wealth.

Involving your spouse in planning

Business owners should also periodically review whether their shareholding structure aligns with their wider family objectives.

Where appropriate, involving a spouse or civil partner in the ownership structure may allow dividends to be declared to those who pay tax at a lower rate. Equally, where a spouse works within the business, they may receive tax-efficient remuneration in the form of salary and employer pension contributions.

Of course, any such arrangements must be commercially appropriate and reflect genuine ownership rights, duties and responsibilities.

2. Build a ‘Plan B’ pot outside of the business

‘My business is my pension’ is a phrase we hear from business owners time and again.

However, pinning all of your financial future on the success of one company is a significant risk. No matter how successful a business appears today, factors outside of the owners’ control can affect performance, and therefore financial security, without warning.

It is therefore sensible to gradually build wealth outside the business, forming a viable ‘Plan B’ should ‘Plan A’ not materialise. The aim is not to replace your main wealth-generating asset - it is to ensure that your financial future does not depend entirely upon it.

Consider building a diversified investment portfolio, including shares in leading companies across multiple sectors, geographies and markets, alongside other asset classes that further diversify your wealth.

Utilise tax-efficient wrappers, such as:

• Pensions
• ISAs
• General investment portfolios
• Offshore investment bonds
• Family Investment Companies

The result is a more balanced financial position, where your future remains closely linked to the success of the business, but is not entirely dependent upon it.

3. Maintain a personal emergency reserve

One of the most overlooked aspects of planning is liquidity.

Ask yourself:

• What would happen if you had to stop remunerating yourself for six or twelve months?
• Would your household expenses be covered?
• Would mortgage payments, school fees and other commitments continue without disruption?

A personal emergency reserve provides financial breathing space during unforeseen events. These funds should be held in accessible, low-risk arrangements where they can be called upon when needed.

The objective is security, not investment return.

4. Protect against disaster

It’s never nice to think about worst-case scenarios, but planning for the unexpected is an essential part of protecting both your family and your business.

Protecting your family

Many families depend heavily upon the business owner to fund their lifestyle and financial commitments. If illness, injury or death occurred unexpectedly, the financial consequences could be severe, so it’s important to arrange protection to give financial resilience against these events.

• Income protection insurance is designed to provide a replacement income if illness or injury prevents you from working for an extended period.
• Life insurance can provide a lump sum to support your family or repay liabilities in the event of your death.

For business owners, it can be tax efficient to arrange certain protection plans through the company, so it is worth exploring how cover can be structured alongside your wider remuneration strategy.

Protecting your business

If a key individual within the business were unable to work due to death, illness or disability, it could have a significant impact on profitability, operations and business continuity.

Consider how your business may be impacted, and therefore any need for the following protections:

• Key person insurance provides a cash injection if a key individual dies or becomes seriously ill, helping the business manage lost profits, recruit replacements, or meet ongoing financial commitments.
• Shareholder protection: In the event of a shareholder’s death, the company shares will pass to their beneficiaries under the terms of their will (or the laws of intestacy if there is no valid will). This can create uncertainty for both the family and the remaining shareholders.

Shareholder protection provides a lump sum to the business. This is then combined with an appropriate legal agreement that gives the surviving shareholders the option to buy the deceased shareholder’s shares and the beneficiaries the option to sell them. Together, these arrangements provide certainty for both parties. Surviving shareholders know that funding will be available to acquire the shares, while the family can be confident they will receive fair value for the deceased shareholders interest.

Don’t neglect will planning

Your Will should clearly address what should happen to your business interests on death, ensuring that shares pass to the right people and in a way that supports your wider family and succession objectives. This is particularly important following the £2.5m per person cap on 100% Business Relief that has applied since April 2026.

Arrange Lasting Powers of Attorney (LPA)

An LPA is a legal document that appoints attorneys to make decisions on your behalf in the event that you lose capacity (or before, if nominated). We strongly believe that everyone should have LPA’s in place.

For business owners, the person you trust to manage your personal finances is not always the same person you would want making decisions relating to your business interests. If so, consider setting up a Business LPA to appoint someone with the appropriate commercial knowledge and experience to deal specifically with business matters.

5. Consider your succession plan early

The most successful exits are rarely created overnight. They are usually the result of years of careful planning, during which the business owner has thought clearly about what a successful outcome looks like and taken deliberate steps to build a business that is attractive, resilient and capable of achieving that objective.

This starts with defining what success means to you. Do you want the business to remain within the family and pass to the next generation? Would you like the management team or employees to take ownership in time? Or is your aim to secure an eventual sale and convert the value you have built into personal wealth? The answer will influence many of the strategic, tax and financial planning decisions you make over the years ahead.

For those considering an eventual exit, it is important to understand the different routes available. These may include:

• Trade sale – a sale to a competitor or strategic buyer seeking to expand their market presence or capabilities.
• Private equity investment – where some or all of the company is sold to a private equity investor, often providing the opportunity to realise value while retaining an interest in future growth.
• Management Buy-Out (MBO) – where the existing management team acquires the company.
• Employee Ownership Trust (EOT) – where ownership is transferred to employees via a trust structure.

Whatever the expected exit route, preparing early can make a significant difference. Ensuring your business is ready for sale, with robust financial information and the required documentation for a diligence process, can help increase your options, improve enterprise value and ensure your eventual exit supports your wider personal and financial goals.

6. Seek professional advice

Business owners face a unique set of financial planning challenges. Tax-efficient remuneration, pensions, investments, protection, succession planning and estate planning can all have a significant impact on your long-term financial future, but the rules are often complex and subject to change.

Perhaps more importantly, these areas rarely exist in isolation. Decisions made in one area can have implications elsewhere, and where advisers are working separately, there is a risk that important planning points fall between the gaps. A coordinated approach can help ensure the full picture is considered before key decisions are made.

As a multi-service line team, Forvis Mazars prides itself on delivering joined-up advice across our financial planning, personal tax, corporate tax and corporate finance teams. Working with the right specialists can help ensure opportunities are not missed, risks are managed appropriately and your personal and business planning remain aligned.

Ultimately, seeking advice on these matters can provide financial peace of mind, whilst giving you the time and headspace to focus on what you do best – growing your business.