Personal Financial Planning for Business Owners: Avoid Common Pitfalls
- Alex Shairp
- Oct 6
- 5 min read
As a business owner, your personal and business finances are often intertwined, but neglecting your personal financial planning can put your future at risk. From tax-efficiency to retirement planning, the right strategy ensures your wealth works for you, not just your business.
In this guide, we'll explore the most common mistakes and how to avoid them.
Why personal financial planning matters for business owners
Owning a business can create financial complexity. Without a clear personal plan, you risk:
Overexposure to business risk
Insufficient retirement savings
Unexpected tax liabilities
Difficulty achieving personal goals.
A strong personal financial plan helps you separate your wealth from your business and build long-term security.
Common personal financial planning mistakes to avoid
Relying solely on business value for retirement
Many owners assume selling their business will fund retirement. Market conditions or valuation issues can derail this plan. You may not be able to control the timing of a sale or find the right buyer. Diversify your investments early to avoid losing control.
Neglecting tax-efficient strategies
Failing to optimise income, dividends, and pension contributions can lead to unnecessary tax burdens. Work with a financial planner to structure your income efficiently.
Lack of protection for family and assets
Without life insurance, shareholder protection, or a will, your family could face financial hardship if something happens to you. Your ability to continue creating wealth may be hampered. Ensure you have the right safeguards in place.
Ignoring investment diversification
Keeping all wealth tied to your business increases risk. Build a portfolio that balances growth and security.
No succession or estate plan
Without a clear plan, your wealth could be eroded by taxes or disputes. Estate planning ensures your assets pass smoothly to the next generation.
Best practices for effective personal financial planning
Separate personal and business finances for clarity and protection.
Maximise pension contributions for tax efficiency and retirement security.
Build and emergency fund to cover personal expenses during business downturns.
Review your plan regularly as your business and personal circumstances evolve.
Seek professional advice to align tax, investment, and estate strategies.
How Blackmount Private Wealth can help
At Blackmount Private Wealth, we help business owners create robust personal financial plans that complement their business success. From tax planning and investments to estate and retirement strategies, our tailored advice ensures your personal wealth is protected and growing.
Ready to secure your financial future?
Book a free consultation today and let us help you avoid costly mistakes.
Remember:
he value of investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028).
The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice, and certain forms of estate planning.
Financial protection policies typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Frequently Asked Questions: Personal financial planning for business owners
What is personal financial planning for business owners?
Personal financial planning for business owners coordinates your personal goals (retirement, family protection, legacy, etc.) with decisions you make in the company (how you pay yourself, when you invest, and how you exit). It typically covers cashflow planning, pensions, ISAs, protection, and estate/succession planning. Together, it ensures your personal wealth isn't overly reliant on the business.
How much should I keep in an emergency fund?
A widely used rule of thumb in the UK is 3-6 months of essential outgoings kept in easy-access cash, so you can handle personal shocks (income gaps, major repairs, etc.) without raiding investments or business cash.
What pension allowances apply in 2025/26
Annual Allowance: £60,000 (subject to tapering for very high earners; threshold income £200,000, adjusted income £260,000).
Money Purchase Annual Allowance (MPAA): £10,000 if you've flexibly accessed DC pension benefits.
Lump Sum Allowances: Since April 2024 the former lifetime allowance framework was replaced; the standard individual lump sum allowance is £268,275, and the standard individual lump sum & death benefit allowance is £1,073,100.
Can my company pay into my pension? And is it tax-deductible?
Yes. Employer (company) pension contributions can be deductible for corporation tax when they're part of a remuneration package paid "wholly and exclusively" for the purposes of the trade. For directors, employer contributions are often more tax efficient than personal contributions and aren't capped by your "relevant earnings" (though the £60,000 annual allowance still applies).
I've started taking flexible pension income, how much can I still contribute?
If you've flexible accessed your defined contribution pension, the MPAA limits tax-relieved contributions into DC pensions to £10,000 a year (you can't used carry-forward to exceed this).
How much can I invest tax-free in ISAs? And can I open more than one per year?
The ISA subscription allowance for 2025/26 is £20,000 across Cash, Stock & Shares, Innovative Finance, and (if eligible) Lifetime ISAs. You can subscribe to multiple ISAs in the same tax year (while staying within your overall £20,000 limit).
If I sell my company, can I reduce Capital Gains Tax personally?
You may qualify for Business Asset Disposal Relief (BADR) - formerly Entrepreneurs' Relief - so qualifying gains up to a £1 million lifetime limit are taxed at 10% if conditions are met. Assess whether you are eligible for this before an exit. There are also ways to defer CGT.
How do I pass my business to family tax-efficiently?
Business Relief can reduce the taxable value of certain business assets for Inheritance Tax purposes by 50% or 100% if conditions are met.
(Note: The government has proposed changes from April 2026 that will cap Business Relief. You should seek advice on this)
I pay myself mainly in dividends. Can I still get pension tax relief?
Personal tax relief is limited by your relevant earnings. Dividends don't count as earnings for this test. However, employer (company) contributions aren't constrained by your personal earnings (subject to the "wholly and exclusively" rule and the annual allowance).
When should I seek regulated financial advice?
If your situation involves complex tax, pensions, or estate/exit planning, getting advice from a FCA-authorised adviser helps you make suitable investment decisions and stay compliant.
It is important to take professional advice before making any decision relating to your personal finances. Information within this blog is based on our understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions this blog might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.
The information contained in this blog is for information only purposes and does not constitute financial advice. The purpose of this blog is to provide technical and general guidance and it should not be interpreted as a personal recommendation or advice.
Details correct at time of writing.
