Put yourself back in control of your finances

The Money and Pensions Service defines financial wellbeing as feeling secure and in control of your finances, both now and in the future. It’s knowing that you can pay the bills today, can deal with the unexpected, and are on track for a healthy financial future.

As a manager or business leader, alongside your personal finances you also have the added responsibility of managing your business’ finances. There is lots of evidence to show that money and health are intertwined - at its most basic this is demonstrated with the clear link between life expectancy and low income.

As a business leader, constantly worrying about finances takes its toll. Depending on the life stage of your business, this may include raising capital, managing debts or meeting strategic targets. Or your priority may be to simply ensure there is adequate cash flow at the end of the month to pay your staff and suppliers.

As a conscientious or ambitious professional, a certain level of low level ‘worry’ is to be expected - you worry because you care. You can look to general wellbeing management such as work/life balance, diet and exercise to manage this. But when financial worries start to affect your quality of life - manifesting as anxiety, depression, sleep or addiction issues - then it’s time to seek support.

If you’re worried about your business finances, the first thing to do is begin the conversation. It is never too late and once you start to discuss it, you’ll feel like you’re making progress. Personal situations may vary, but you could arrange a meeting with a financial advisor, bank, solicitor, an insolvency practitioner or even a Dorset Chamber GU6 champion. They’ll help you to explore what’s happening so that you can make a plan and regain control. Life and business doesn’t always run to plan, but there is ALWAYS help available.

Personal Finance

Hot Topics for Business Owners and Entrepreneurs

Kurt Lee, Partner, Lester Aldridge

1. Planning for the end of the tax year

The Additional Rate (45%) income tax threshold falls from £150,000 to £124,140 on 6 April 2023. If you fall within this band, your company could consider declaring additional income or dividends in the current year to have the income taxed at 40% rather than 45%.

2. Avoid the 60% marginal rate www.lesteraldridge.com

Once your income goes above £100,000, your personal allowance (£12,570) begins to taper away. If you’re caught in this band, your marginal tax rate is 60%. In this scenario, you should plan your remuneration carefully. You could pay less, to ensure your income is below the £100k threshold or you could pay more to take you over the £125,140 threshold. If you fall within this band but are not in control of the timing or amount of remuneration payments or dividends, consider making pension contributions so as to bring yourself back within the £100k threshold.

3. The unwanted business exit – death! Have you thought about what would happen to your business following your death? Who would take over? What would the value be? Maybe you have a good No.2. Maybe there would be a management buy-out? How might those key employees who helped you build and grow the business be compensated if you fall off the perch? Lots of questions, and there’s no single answer. Insurance policies may play a part, but two key aspects are (1) have Business LPA’s which can be used in the event of incapacity and (2) make sure your Will has all the right protections, controls and powers for your executors to wind up or sell your business on for the benefit of your employees, business partners and most importantly, your family.