How We Help Business Owners Build a Tax-Efficient Retirement

Building a Business Is Hard Work — Turning It Into a Retirement Plan Shouldn’t Be 

Building a business is rarely straightforward. In the first year, around 94% of new businesses survive; however, by the fifth year, this drops to approximately 40%, according to the Office for National Statistics. 

For many entrepreneurs, every spare penny is invested in building and sustaining the business. A study by Rathbones found that 83% of family-run business owners rely on their business to fund retirement, while earlier research showed that 59% of SMEs expect to sell their business to finance life after work. 

It’s understandable, but it’s not always the most tax-efficient or reliable path to long-term financial security. 

The Unique Retirement Challenges Business Owners Face 

For employees, retirement savings are straightforward: your employer makes regular contributions to your pension each month, and you benefit from a predictable income. 

For business owners, it’s far more complex. You’re responsible for every aspect of your income, from cash flow and payroll to tax efficiency. In the early years, income can be inconsistent, making it difficult to commit to regular savings. 

Even once the business is more established, it’s easy to assume “the business will fund my retirement.” However, this can be risky, both from a tax perspective and a wealth preservation standpoint. 

The Opportunity – Using Tax-Efficient Strategies 

Pension Contributions 

For business owners, pension contributions are one of the most tax-efficient ways to extract profits from the company. 

  • Employer pension contributions reduce taxable profits, lowering corporation tax. 

  • The funds grow free from capital gains and income tax within the pension wrapper. 

  • They are also protected from business liabilities, safeguarding your future wealth. 

Profit Extraction Strategies 

At Ifamax Wealth Management, we work closely with business owners and their accountants to determine the most efficient ways to extract profits, whether through salary, dividends, or employer pension contributions. 

The right blend depends on your circumstances, tax position, and long-term goals. A tailored approach ensures you retain more of what you earn. 

Business Sale Planning 

When it’s time to sell or step back, Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, can make a substantial difference. 

Under current rules (2025): 

  • There is 14% Capital Gains Tax (CGT) on qualifying gains from 6 April 2025 and 18% from 6 April 2026. For higher-rate tax-payers, gains that do not qualify for BADR will be subject to a higher rate of 24% on chargeable assets. 

  • There’s a lifetime limit of £1 million in qualifying gains. 

  • It applies to the sale of shares in your trading company or business assets if you’re a sole trader or partner. 

To qualify, you must: 

  • Have owned the business or shares for at least two years. 

  • Be an employee, director, or partner in the business. 

  • Hold at least 5% of shares and voting rights (if selling shares). 

How it fits into retirement planning: 

  • It enables you to extract more value from your business by reducing tax on gains. 

  • The proceeds can be reinvested into pensions or investment portfolios tax-efficiently. 

  • When combined with pension contributions and ISA planning, BADR can be a cornerstone of a tax-efficient retirement strategy. 

Investment Structures 

Your retirement plan should be as unique as your business. Whether you use personal pensions, ISAs, or General Investment Accounts (GIAs), the key is how these wrappers are structured to deliver tax-efficient income in retirement. 

A good plan doesn’t just look at saving; it also considers how you’ll generate income later while minimising tax exposure. 

How Ifamax Helps 

 At Ifamax Wealth Management, we help business owners: 

  • Align business and personal financial goals. 

  • Build bespoke retirement strategies through our Centralised Retirement Proposition (CRP®). 

  • Adapt plans as tax rules, business performance, and lifestyle goals evolve. 

With proper planning, your business can not only fund its present, but also its future. 

Conclusion 

Your business is your legacy. With expert guidance and strategic planning, you can transform that legacy into a tax-efficient retirement that provides you with freedom, flexibility, and peace of mind. 

If you’re a business owner in Bristol looking to retire efficiently, we’ll help you grow, protect, and pass on your wealth, tax-efficiently. 

start your journey today

 

Risk warning    

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed. 

Ashton Chritchlow