If you are a business owner, growing your company is likely a priority. As such, when you generate revenue, you may reinvest much of that wealth in the business.
While this is important, you might be focusing too heavily on business growth and sacrificing your personal financial situation.
This is a common issue among business owners, and if you do not consider your own finances, you may find it difficult to achieve everything you want to in life.
Read on to learn why it is important to find a balance between business growth and personal finances.
Only 22% of self-employed individuals are contributing to a pension
When you are building a business, you put everything into making it a success in the short term. As such, you may not think ahead to your retirement.
You would not be alone in this, as many business owners are not effectively saving for retirement.
According to a 2025 report from the Social Market Foundation, only 22% of the self-employed were contributing to a pension, compared with 79% of employees.
This marks a significant decline in pension engagement over the past few decades. In 1998, 60% of the self-employed were contributing to a pension.
Business owners prioritise reinvesting in the company and holding liquid assets
To understand why business owners might be neglecting their personal wealth, you must consider their financial aims.
The research from the Social Market Foundation revealed that most business owners said growing the company was their main priority after meeting bills and expenses. If you feel the same, you might be more inclined to invest surplus funds in the business instead of contributing to a pension.
Further to this, when business owners do extract wealth from the business for themselves, they often prioritise liquid assets. For instance, more than half of business owners earning less than £20,000 a year put spare cash in an easy-access savings account. 31% of those earning more than £75,000 a year did the same.
Having easily accessible cash may be useful as a business owner because your income can fluctuate considerably. In years when you earn less, you might draw from your savings to cover expenses.
However, if you put all your savings into an easy-access cash savings account, you could miss opportunities to grow your wealth and secure your financial future.
4 ways a financial planner can help you balance business and personal finances
1. Creating a detailed budget
Reinvesting all your surplus wealth into the business could mean you do not save enough towards your own personal aims. However, you do not want to neglect the business altogether, so a detailed budget is key.
We can review your earnings and expenses to consider how much you can comfortably afford to contribute to your own savings and investments, while also investing in the business.
2. Drawing wealth from your business tax-efficiently
The level of tax you pay when extracting wealth from your business depends on how you receive those funds.
For example, you might pay yourself a salary, which is subject to Income Tax. Meanwhile, if you draw dividends, you will pay Dividend Tax, which is charged at a lower rate.
We can discuss the most tax-efficient ways to draw wealth from the business, meaning you keep more of your hard-earned cash. This gives you more opportunities to build your personal wealth.
3. Making use of pension contributions
Pension contributions are an incredibly effective tool for business owners because they are considered an allowable business expense.
This means that you can pay personal pension contributions from the business, building your retirement savings and potentially reducing your Corporation Tax at the same time.
However, the rules around tax and pension contributions can be complex. We can help you structure your contributions in the right way, so you can draw wealth from the business and build your savings tax-efficiently.
4. Building an investment portfolio
Paying into a pension is a useful way to save for retirement. However, you might have other financial aims beyond retirement, such as supporting family members financially or buying a holiday home. As such, you may want to build wealth outside your pensions.
As we have seen, many business owners hold excess funds in easy-access savings accounts. Having some cash is useful for emergencies and short-term expenses, including holidays or a new car.
However, the growth from cash savings may be limited. Meanwhile, investing could offer significant returns, meaning you have more financial freedom later.
A recent study from Barclays compared the real-terms growth of cash (accounting for inflation) with investment returns. The results showed that, over the past 20 years, holding cash instead of investing in global equities could have resulted in missed growth of 62.1 percentage points.
Naturally, past performance does not guarantee future returns, and you always adopt some level of risk when investing. However, with our support, you can build a well-diversified portfolio and reap the benefits of investing.
Get in touch
If you are a business owner looking to build your personal wealth, then please do get in touch with us at DBL Asset Management.
Email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.