Merging business and personal financial planning can pay dividends
For those of you who are business owners, or who have business owners as clients, it is likely that a relatively large amount of your wealth is currently placed within your business.
This arrangement is doubtless one of necessity, created at business formation, but it can cause problems for your financial planning.
For example, the government has just announced, during the Summer Budget, that the rules around dividend taxation are going to change. A £5,000 tax free allowance has been added, but anything above this will be taxed at a rate linked to your income tax level. Additional rate taxpayers, for example, will pay 38.1% on anything over the £5,000 allowance.
Paying dividends is of course a good thing for your business to be doing, a sign that it is performing well. Dividends are also, potentially, a good way for you to take an income from your business, instead of a larger salary, but is that still the case with this change? The picture will need to be looked at again.
This is just one fairly simple example of how personal and business finances intertwine, but there are more complicated scenarios.
At retirement, for example, many business owners factor in some income from a business sale, or partial business exit, to fund their lifestyle. What happens though, if a sale cannot be agreed? Or your business is worth less than you expected? Or you sell and find that the funds do not allow you to live your desired retirement?
Factoring business performance and the chance that you may not sell at the expected time and price into your personal financial planning can make all the difference, and there are many more areas besides where business and personal financial planning can work in perfect harmony.
Wherever you feel the current ‘gaps’ are between the two at the moment, we would be happy to have an informal conversation about how you feel they could be bridged and work better for both your business and your personal financial aims.