Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing.

Financial tips for small business owners in the UK

Many small business owners are too busy running their business to consider managing their own finances.

Here are some tips for small business owners to consider when looking after their own finances as well as the financial security of their business.

Separate your personal and business goals

You should take the time to distinguish between personal and business financial goals. When running your own business, it can be easy to put the business goals ahead of your personal goals such as planning for your children’s education or your retirement.

Keep business and personal expenses separate

It is important to keep your business and personal expenses separate. Separation will make calculating tax and your company’s valuation simpler.

Start by opening a separate business bank account and credit card for expenses. This will help to build your business credit score should you need to secure extra business funding in the future.

Pay yourself a wage

When starting a small business it is important to pay yourself. You can start by setting yourself a very low salary while you are using capital to grow the business. Paying yourself a wage will test the profitability of your business. Many small business owners start by paying themselves an amount that covers the National Insurance threshold to make their salary tax-free.

Save for your own retirement

Some small business owners rely on their business to continue to grow and often believe that they can rely on this growth to fund their retirement. However, it is important to consider that the business could underperform and not be able to fund your dream retirement. There is the added risk that using your business to fund your retirement makes you financially dependent on your business and causes unnecessary stress for you if it does not perform as well as you hoped.

It is important to save for your own retirement separate to your business by setting up a personal pension. A pension is one of the most tax-efficient ways to save for your future. Your company can usually contribute up to £40,000 per year to your pension and receive corporate tax relief. You can also utilise previously unused allowance from the previous three tax years through ‘carry forward’. Speak to a Financial Adviser about utilising the carry forward allowance.

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Make sure you have the correct insurance in place

Unfortunately, the majority of business start-ups fail. It is important to take out appropriate insurance to cover both your personal and business assets. You are likely to need multiple insurance policies to protect your assets in multiple situations.

Small companies are vulnerable if they lose a key member of its workforce. However, many small business owners are more concerned with generating profits rather than considering the long term and protecting the business income. Have you considered what will happen to your business if you as the business owner were to get ill? Our Financial Advisers can find appropriate critical illness and/or income protection cover to protect you and your company. Policies can be tailored to your company needs.

At Four Wealth Management, we offer a small business financial planning service and your dedicated Financial Adviser will work with you to review your current policies and to ensure you have the correct insurance policies in place for both your personal and business circumstances.

Learn more about our financial planning services for small businesses

Diversify your investments

Many small business owners invest their assets back into their own business. However, this increases the level of risk. You should consider investing outside of your industry to diversify your investments and spread the level of risk.

At Four Wealth Management, your Financial Adviser will work with you to create a diversified portfolio that takes into consideration your attitude to risk.

Continue to plan for the future of your business

Careful research and planning can determine the success of your small business.

It is important to continually track business expenses; if you are unable to do this yourself, you should employ someone or consider using an accountant.

You need to establish a monthly and annual budget for your business and stick to it. This is particularly important when starting your business.

You need to ensure your business is financially viable and able to generate enough revenue to cover your expenses.

Create a business succession plan

You should have a business succession plan or exit strategy* in place for your business. You may not want to think about the possibility that you could leave your business but it is important to have a succession plan in place for when you do leave the company. A succession plan will enable a smooth transition in leadership and address financial and tax planning.

Choose the type of your company wisely

When starting out, many small business owners operate as a sole proprietorship. However, this means there is little distinction between your business and personal assets which can put your personal assets at risk.

A limited company has its own legal identity, which is separate from its shareholders and directors, even if it is run by just one person who is acting as both the shareholder and director. Setting up a limited company will protect your personal assets in case of a lawsuit.

Tax requirements differ depending on the type of company you choose.

Start your personal and business financial planning today

At Four Wealth Management, our corporate financial planning service will help prepare your business for the future and help protect your assets.

We can also help small business owners to achieve their personal goals.

Find out more about financial planning for your business

The value of an investment with St. James’s Place 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.

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

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

Enquire Now

If you have any queries or would like to arrange a face to face meeting with an adviser for a no obligation review of your personal finances, simply book a call back using the form below. Alternatively, you can call us on 0117 973 0500.

The Partner together with St. James's Place Wealth Management plc are the data controllers of any personal data you provide to us. For further information on our uses of your personal data, please see the Partner's Privacy Policy or the St. James's Place Privacy Policy.

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Financial tips for small business owners in the UK
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