Five wealth planning tips for business owners
In this article, we focus on wealth planning for business owners and offer 5 key insights on pensions, inheritance tax, protection policies and investments.
In the first two sections of this guide, we cover inheritance tax and protecting yourself against life’s unknowns.
From there we offer insight into the significant tax advantages of investing in a pension, and the benefits of working with a wealth planner.
Lastly, we conclude this guide to wealth planning for business owners by discussing the importance of diversifying your investment portfolio.
Be clear on your inheritance tax position
Inheritance tax is paid on the value of an individual’s estate at the time of their death. The amount is worked out on the value of an individual’s assets.
Businesses are assets, and their value is subject to inheritance tax. Getting clear on your current and future IHT position will help you manage and plan for any taxes that may be charged against your estate.
There are many ways to reduce or avoid inheritance tax. This can include using equity release, gifting, life insurance, signing over property, Business Property Relief and trusts to mitigate IHT.
Protecting yourself against life’s uncertainties
As we all know, life can throw us curveballs. You never know what is around the corner.
To protect you and your business against life’s uncertainties, think about the protection policies below:
The are a range of personal protection policies to help your family should you pass, or to protect your finances and property should you fall ill.
- Life cover
- Critical illness cover
- Income protection
- Mortgage protection
Related reading: Insurance – what you need and what you don’t
There are also specific business protection policies to help protect the business in the event of your death, long term ill health and more. These include:
- Key Person Insurance: Safeguard against profit loss or replacement costs due to the long-term absence of a crucial employee.
- Business Loan Protection: Ensure loan repayment in case a key individual is lost.
- Shareholder Protection: Maintain business control and ensure a fair valuation for incapacitated shareholder’s shares.
Making the most of pensions
Maximising pension contributions isn’t just about securing personal retirement funds; There are also tax advantages to paying into as pension – either personally or via company funds.
For example, pensions are a tax efficient investment. Business owners often fall into the higher tax brackets. Therefore, when paying into a pension, can give tax relief of up to 45%.
Where businesses pay into a pension using company funds, this is offset against corporation tax.
If you would like to know more detail about how this works, below are links to articles from other well known industry publications:
In the remaining sections of this guide, we focus on the benefits of working with a wealth planner. and the importance of diversifying your investments.
The benefits of working with a wealth planner
Working with a wealth planner offers invaluable expertise, allowing you to focus on your business activities while a professional looks after your wealth, investments and helps reduce taxes.
A wealth planner offers:
- Pension advice and management
- Tax advice
- Inheritance tax and estate planning
- Investment management
- Personal and business protection
If you would like to know more about the role they play, find our out more about our wealth management services.
Why it’s important to diversify investments
Diversifying investments is a way to manage risk and enhances the potential for long-term financial success. By spreading investments across different asset classes, such as stocks, bonds, property, and pensions, investors can reduce their exposure to the volatility of any single market or sector.
While stocks may perform well during economic growth, bonds may offer stability during periods of market downturns. Diversification helps investors weather market ups and downs and makes sure that savings are relying on the performance of a single investment.
Related reading: Investment risk
Wealth planning for business owners – summary
Wealth planning is important for business owners looking for financial well-being.
By using pensions, understanding inheritance tax, having enough insurance, working with wealth planners, and diversifying investments, business owners can look toward long-term prosperity.