5 Smart Financial Moves Every Irish Business Owner Should Think About
Running your own business takes guts, drive, and a lot of energy. It can also be an incredibly lonely place where you find yourself wondering if you’re doing the right thing at any given moment. While you’re busy growing your business, it’s easy to let your personal finances sit on the back burner. But, as a business owner, there are a few key things you should be thinking about, not just to protect your business, but to secure your own financial future.
Here are five smart, practical financial steps to consider:
1. Extract Wealth from your Business – Tax-Efficiently
Leaving money sitting in the business can lead to missed opportunities and higher tax liabilities in the long run. There are smarter, more tax-efficient ways to grow your personal wealth, such as:
- Company pension contributions (tax-deductible for the company and not considered as a benefit-in-kind for you)
- Dividends or salary, depending on your income and structure
- Bonuses or once-off payments before your financial year-end
A good strategy helps you reduce risk, build personal wealth, and make your money work harder, all while staying fully compliant.
2. Plan your Exit Early
Even if you’re years away from retirement or not planning to sell your business anytime soon, the sooner you start thinking about your exit strategy, the better.
There are two tax reliefs worth knowing about:
- Retirement Relief: up to €750,000 CGT free if you sell business assets after age 55
- Entrepreneur Relief: reduces CGT to 10% on disposals up to €1 million
Both have specific rules, so early planning is key, especially if you’re passing the business to family or selling to a third party.
3. Build Your Pension – Don’t Leave It Too Late!
Pensions are still one of the most tax-efficient ways to build personal wealth. But too often, business owners put it off. Here’s why it matters:
- The company makes the contribution, and gets full corporation tax relief
- Funds grow tax-free (no DIRT or CGT)
- A tax-free lump sum of up to €200,000 is available at retirement
Starting early gives your pension more time to grow, and gives you more control over your future.
4. Pay Yourself a Proper Salary
Lots of business owners underpay themselves to reduce tax or PRSI, but that can cause problems. A low salary can limit:
- Mortgage approval (banks may ignore dividends)
- Pension contributions (limits are based on salary, not dividends)
- Personal Lifestyle can be affected. You’re entitled to have a nice lifestyle outside of work, or else you may begin to wonder “is it all worth it?”. It’s not all about tomorrow, sometimes it’s about today.
Instead of paying too much or too little, aim for the right balance between salary and wealth extraction, ideally tailored to your tax position and business goals.
5. Take the biggest risk off the table – Put Co-Director Insurance/Personal Insurance in Place
What would happen to the business if you were unable to run it on a day-to-day basis, or worse, what would happen if you died? These questions become even more relevant if you are in a partnership or a business with multiple shareholding directors. What happens to that person’s shares if they die?
Depending on how the insurance is set up, premiums can be paid either by the company or personally by the director. In some cases, where the policy is designed to protect the business (such as shareholder or key person cover), the company may pay the premium and there could be tax advantages.
If the policy is for personal benefit, like life cover for your family, it’s often paid personally — or treated as a taxable benefit if paid by the company. Every case is different, so it’s important to get professional tax advice on the most tax-efficient structure for your needs.
Final Thoughts
You’re investing an incredible amount of time and effort into the business, so it’s vital that the business also invests in ensuring your financial planning is in order. Owning a business gives you control and flexibility, but it also means taking more responsibility for your personal financial planning. From exit planning to pensions, tax reliefs and insurance, a little forward thinking now can save you a lot of stress (and money) later.
Get Professional Advice
If you’d like support with any of the topics above or just want to check you’re on the right track, feel free to get in touch. Our team can walk you through your options and help you build a plan that works for both your business and for your future.
