Personal Financial Planning for Business Owners

Personal Financial Planning Solutions for Business Owners

To what degree do you expect the business to form part of your assets?


How do you view your business in the context of your overall financial goals?


You might find that relying on your business to fund your retirement restricts your options for the future… 


Building and maintaining a new business in the current climate is not an easy task, but it’s vital that you look after yourself and any family members who are helping you grow your business from the start. In addition to your insurance make sure you have the right protections in place, you’re availing of all relevant tax reliefs & you’re future proofing yourself regardless of what happens in your business. This will benefit the company and your personal finances in the long term.


Here we look at some useful financial tips for business owners to help improve your future financial security and …. maybe encourage you not to put all your eggs in your business’s basket.


Many small business owners are often too focused on growing and running their business to think about managing their own finances, particularly when it comes to their financial security. However, you could be benefiting from your business while it’s growing by availing of tax reliefs and building valuable service time to protect and benefit you and your family in the long run.



Look after yourself as well as your business



Separate your personal and business goals

Take the time to distinguish between your personal and business financial goals. It can be easy to put the business goals ahead of your personal goals when you’re running your own business.  It’s just as important to set out your personal financial goals and how you’re planning to achieve them such as funding your children’s education or your retirement.


Draw a Salary

All too often business owners don’t draw a salary from the business in the early years. Those who do usually do so ad-hoc – expenses, dividends, etc. It’s so important as a business owner that you draw PAYE earnings as soon as you can in order to create service for tax purposes. The number of years of service that you have is dictated by the number of years that you’ve had remuneration from a tax perspective. The more service you have accrued the better for you in the long run, in terms of your pension or a possible termination payment from the company. Make sure to pay yourself first. It’s a good habit to set aside money consistently as this provides a safety net for any unexpected expenses.


Protect your Income

Life is unpredictable and as a business owner/self-employed it can be even more so, especially in the early years. Income protection or serious illness cover is something you should consider especially if you have a family relying on your income. Income protection insurance pays out a regular cash payment that replaces part of your lost income if you can’t work due to a medium to long-term illness or disability.


Studies from Zurich and Irish Life show that in 2022 there were over twice as many claims for living benefits as for death. Cancer accounted for the majority of all income protection/serious illness claims.  The average age of serious illness claimants was between 51 and 53 years. Claimants of income protection were around 46 years of age. As a business owner/self-employed you may not be entitled to sick pay, but even if you are it may not be enough to meet your monthly expenses. This is something the company can pay for while availing of tax relief on premiums.  Make sure you’re availing of it.


Protect your Share of the Business

Businesses insure their premises and equipment against financial loss, but very often they overlook their key business assets, their people. Key staff represents the beating heart of every business, especially in a small, family business. While insurance can’t replace key personnel, it can provide cash to buy time, cover the costs of temporary staff, recruitment, loss of profits or provide a cash injection. Prolonged absence through serious illness or even death can be detrimental for some of these firms. The risks are the same whether it’s a limited company, partnership, or sole trader.


It’s vital that you have a shareholder agreement in place as well as adequate business protection to ensure you retain control of your business in the event of the death or serious illness of your business partner. It also helps to preserve the continuity and survival of your business. Having proper protective structures in place can help lessen the financial impact of such an event giving you a financial cushion to allow you to decide on what to do next.


Extract Value from your Business

So, how do you extract your share from a business in the most tax-efficient manner?

  • A company can fund a pension scheme on behalf of its owners/ directors based on the level of income they are earning and claim tax relief on it which can be significant. It’s a great way to save tax-efficiently for retirement subject to certain rules.
  • Retirement relief from capital gains tax can potentially reduce a business owner’s tax bill substantially when they dispose of their share of the business and they can still continue to work in the business if they wish.
  • The third option to consider is possible termination payments such as severance pay, ex-gratia payments, redundancy, etc. The business can make a potential payment of up to €200,000 tax-free to any employee including its owners. This is very much subject to length of service, which is why it’s important to draw a salary from your business immediately.


Invest in your Future

Making contributions into a pension not only ensures you have a sufficient income when you retire, it also provides you with generous tax relief that you can’t get elsewhere, so you keep more of your hard earned income whilst growing your wealth. A salaried director of a limited company can avail of very attractive levels of pension funding with tax relief for themselves and the company. Your Pension should be an essential part of your financial plan. Both the tax relief and the long-term nature of a pension makes it one of the best retirement planning and wealth extraction tools available for Co-Directors and Business Owners today. Click here for more information on the benefits of setting up a retirement plan for yourself and your company



Employ your Spouse or a Family Member

Employing a spouse or family member is something we’ve spoken about consistently to business owners and self-employed clients. If your spouse or a family member is “helping out” with admin, marketing, accounts, etc unpaid, they’re not technically employed by the company, so they cannot avail of any benefits. Should the company become cash-rich, instead of taking out some of the profits put them into a pension.  You can’t do this if that person has no service record, i.e. doesn’t pay PAYE. If you have family members doing any work for the company set them up as a PAYE employee.


Building a new business is not an easy task. It’s vital that you look after yourself and any family members helping you grow your business from the start.  You can build their service record and avail of all tax reliefs at the same time. This will benefit the company and your personal finances in the long term.


This article is intended to provide general information and is not intended to be financial, tax, or legal advice. Every situation is different, and legislation can change. Before making any decisions, you should discuss your specific situation with your tax and legal advisors… and if you need help get in touch