Tax Planning Strategies Business Owners Should Know

Posted on 24 Jun 2025

Steve is a Rochdale-based Financial Adviser and Director of Front Row Financial who will be providing financial insights for the RDA’s Financial Lens, this month we will be exploring some of the “Tax Planning Strategies Business Owners Should Know.”

From start-up to sale and exit, tax planning is central to running a successful business.

Any business is taxed on its profits so the more you make, the more you may pay. The taxes you may need to consider this tax year include, Corporation Tax, VAT, Business Asset Disposal Relief (BADR), income tax for salary/dividends, employer and employee NI contributions.

The amount of tax you pay is governed by statute, and based on how your business is structured and how you pay yourself and others. Therefore a clear understanding of the tax implications is beneficial from the outset (although you can change your business structure should it be beneficial to do so).

Choosing a tax-efficient way to pay - If you have a limited company, creating a tax efficient remuneration structure for you and your staff is an important decision. This is the salary versus dividend question. If you have a very profitable year you could choose to pay more dividends, as well as or instead of bigger bonuses. But with recent changes to the rate of Corporation Tax, the increase in the income tax rates on dividends and the reduction of the Dividend Allowance you might decide on a fixed salary structure.

Making pension contributions - Pension contributions are an important consideration for tax deduction, both for retirement planning and tax efficiency. Employer contributions are highly tax efficient since they are generally an allowable expense which in turn reduces corporation tax, for the business owner, you’re also moving money out of your business. So, if the business falters or fails, you have less capital at risk.

Once the money is out of the business and in a personal pension, it’s in your name and separate from the business.

Allowances – A Capital Allowance is where you offset the costs of buying certain assets for the company against your Corporation Tax liability. In the early years when you may be scaling up and investing in both people and plant, such as IT equipment, office furniture, storage facilities or plant and machinery, you should maximise this important allowance.

Sole traders, entrepreneurs or businesses running from home can also potentially claim a percentage of household bills, such as heating, lighting, council tax, and a part of rent or mortgage interest, as business expenses if trading from home.

Align your advisers and build a plan - Involving all your professional advisers – your accountant, tax adviser and financial adviser in your tax planning is absolutely key. Accountants tend to look at tax years, but financial planners and advisers think in decades to help you, your business and family enjoy a long, successful future.

The value of a pension will be directly linked to the performance of the funds you select and the value can therefore go down as well as up.  You may get back less than you invested.

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

Please note that advice with regard to exit strategy planning may involve the referral to a service that is separate and distinct to those offered by St. James’s Place.

If you would like to complete a thirty second quiz to see how prepared you might be for retirement, then scan the QR code below:

Front Row Financial Ltd is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group’s wealth management products and services, more details of which are set out on the group’s website www.sjp.co.uk/products.

SJP Approved 23/6/2025

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