Posted by Sean Maudsley-Barton | December 26, 2012
10 financial tips for business owners and senior managers
This is a simple check list of financial tips to help you to get your personal finances in order.
- Pay off your credit cards every month – sounds simple but there is no point in saving if you have borrowings and this type of short term loan is very expensive.
- A cash ISA, introduced by the government to encourage everyday saving, and it does a good job, so use it. Currently it will shelter £5,640 from tax and anything you make is tax-free – It is surprising how many 50% tax payers overlook this opportunity.
- Go old school and save. Look at your regular expenditure and Save 6 months expenditure, your ISA will provide part of this solution but the rest should be kept on deposit with easy access. Scottish Widows bank direct transfer account gives a good combination of rate and access, but shop around for the best deals.
- If your income just pushes you over the limit for child benefit, a one-off pension contribution could push you back over the line and enable you to receive a benefit of £1,752 per year for two children. See Zen and the Art of Child Benefit Manipulation for more ideas
- A surprising number of senior managers don’t fully fund their (perfectly good) employer’s pension, because the pension fund choices are bewildering. Funding a pension is a really reliable way to save for the future and of reducing your tax bill. A financial planner will be able to help in fund selection.
- The other type of ISA – a stocks and shares ISA. Many people take out a cash ISA but are unaware that they can put another £5,640 into a stocks and shares ISA. Stocks and shares ISA’s have all the benefits of cash ISAs but they have the potential to achieve greater growth, and there is no income or capital gains tax on the returns, depending on your attitude to risk, a good financial planner should use a quantitative approach to assess your attitude to risk and then tailor the portfolio suit you.
- Regular savings – you can put up to £300/month into an endowment policy. Over the term of the plan you could add £36,000 and none of the returns attract capital gains or income tax.
- If you have built up lots of cash on deposit, a single premium investment bond could be for you, you will not pay any tax until you draw money from the investment. This product works well as part of retirement planning, especially if you expect to pay less income tax in retirement, you will pay less income tax on the profit the investment makes.
- Buy shares. Buy individual shares if you are willing to take the risk or buy them through a unit trust if you want someone else to manage them for you. Most people tend to under use their capital gains tax allowance so the gains can easily be sheltered form tax, currently the first £11K of any gain is not liable for tax. If you opt for a share or unit trust which issues a dividend, the gain will have to go on your tax return, unless you purchase this through an ISA.
- Finally if you really, really don’t want to pay tax and you are happy to potentially lose all of the money you invest, try a venture capital trust (VCT). You get tax relief on the money you put in and you the returns are 100% tax free…. The trouble is the returns are often £0.
Parsonage Financial Planning put you at the centre of the planning process. We have many years experience of clients like you and are one of the few Chartered Financial Firms in the country. Like we say “if you want to achieve your goals you need a financial plan”. To speak to a Chartered Financial Advisor call 0161 928 2706 orUse our ask an advisor form