As a business owner, how you pay yourself matters. Doing so without considering the tax implications could mean you miss opportunities to make your income more efficient.

There isn’t a one-size-fits-all solution that will be suitable for every business owner. It will depend on your needs, long-term goals, and the structure of your business, which might also affect what’s appropriate. Seeking tailored financial advice could help you create a strategy that’s right for you.

3 ways you could tax-efficiently withdraw money from your business

1. Taking an income

Perhaps the most straightforward option is to pay yourself a salary from the business. However, many business owners opt to take a relatively low income to manage their Income Tax liability.

For example, you might keep your income below £50,271 – the threshold for paying the higher rate of Income Tax in 2026/27 – to avoid being pushed into a higher tax bracket.

As well as your Income Tax rate rising from 20% to 40% if you became a higher-rate taxpayer, you might lose other allowances.

For example, the Personal Savings Allowance, the amount you can earn in interest before you may be liable for Income Tax, is £1,000 for basic-rate taxpayers. For higher-rate taxpayers, it falls to £500.

Similarly, your Personal Allowance (the amount you can earn without paying Income Tax) falls by £1 for every £2 of income above £100,000. This means the adjusted net income between £100,000 and £125,140 is effectively taxed at a rate of 60%.

So, you might want to take a reduced salary from your business and supplement it with other sources. As you’ll be in control of your income, you could adjust it to improve your tax strategy.

2. Receiving dividends

A dividend is a portion of your company’s post-tax profits that is paid to shareholders. You may use dividends to tax-efficiently extract profits.

In 2026/27, you can receive up to £500 in dividends before tax is due, thanks to the Dividend Allowance. The rate of tax you pay on dividends above the allowance will depend on your Income Tax band. In 2026/27, the Dividend Tax rates are:

• Basic rate: 10.75%
• Higher rate: 35.75%
• Additional rate: 39.35%

As the rates are lower than the Income Tax rates, using dividends rather than a salary to boost your income could be tax-efficient.

You can declare dividends as often as required, assuming there are sufficient profits, which can be useful when managing your tax liability.

3. Contributing to your pension

The money held in your pension isn’t usually accessible until you turn 55 (rising to 57 in 2028), so this option won’t increase your income now. However, you could consider paying into your pension as a way of paying your future self, and there are tax benefits to doing so.

First, your pension contributions would benefit from tax relief. This provides an instant boost to your retirement savings that has the potential to compound over the long term.

Second, employer pension contributions are typically an allowable business expense, which could reduce your taxable profits when calculating Corporation Tax.

Consequently, contributing to your pension could provide you with financial security in retirement, while offering tax benefits to both you and your business now.

Consider the tax efficiency of your exit strategy

While your focus might be on your current income, it’s never too soon to think about how you’ll exit your business and ways you might make it more tax-efficient.

Typically, when you sell your business, you’ll be liable for Capital Gains Tax. If you choose to leave your business as an inheritance for someone, your estate could face an Inheritance Tax bill. Luckily, there are tax reliefs and allowances that could ease a potential bill.

Speak to us for tailored advice

Whether you want to review your current income or start to plan for retirement, we could help. Please contact us to arrange a meeting.

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.

The 2026/27 tax year started on 6 April 2026. While you have until 5 April 2027 to use tax-efficient allowances and exemptions, making a plan now could be valuable.

Here are four powerful reasons to consider your tax strategy for the current tax year.

Avoid last-minute stress as the end of the tax year approaches

Using tax year allowances and exemptions is often associated with the end of a tax year.

However, leaving decisions until the last minute could mean it’s more stressful than it needs to be, and you might make a rushed decision that isn’t right for you. In addition, delays could occur, which means you miss the 5 April 2027 deadline.

Instead, using the start of the year to review decisions means you have plenty of time to assess what’s right for you.

Potentially benefit from an additional year of interest or growth

If you have a lump sum to save or invest, using allowances early in the tax year means you could potentially benefit from additional months of interest or returns. When you consider the effect of compounding, you could be better off using some of your allowances now.

One option to consider is your ISA annual subscription limit. In 2026/27, you can place up to £20,000 into ISAs. You can choose to save or invest in an ISA to suit your goals.

Adding a lump sum to ISAs at the start of the tax year or drip-feeding contributions over the months could yield better results than waiting until April 2027, particularly when you factor in compounding.

Similarly, the pension Annual Allowance is £60,000 or 100% of your annual income, whichever is lower, in 2026/27. This is the amount you can add to your pension this tax year while retaining tax relief.

Your pension is usually invested. Depositing a sum now could mean your additional contribution has a longer period to potentially deliver returns and boost your retirement savings.

Remember that all investments carry some risk, and it’s important to understand what level is appropriate for you. Investment returns are not guaranteed, and you could lose money.

Create a strategy for disposing of assets

If you plan to dispose of assets, you might need to pay Capital Gains Tax (CGT) if you make a profit.

The Annual Exempt Amount means you can make up to £3,000 in gains in 2026/27 before tax may be due. Reviewing your options now could allow you to create an effective strategy for disposing of assets.

For example, if you have several assets to dispose of, you might spread the sale of them across the current and next tax years to use the Annual Exempt Amount for both years. Alternatively, you can pass on assets to your spouse or civil partner tax-free, which may allow you to use both your allowances.

Setting a plan early in the tax year means you have time to consider your tax position and goals, and adjust your plan if necessary.

Plan whether to gift assets this year

Over the course of the year, you might want to gift assets to loved ones. This could support beneficiaries and also make sense from an Inheritance Tax (IHT) perspective.

In 2026/27, the nil-rate band is £325,000. This is the amount you can pass on when you die before your estate might become liable for IHT. Fortunately, there are ways to mitigate a potential IHT bill, including passing on your assets during your lifetime.

Not all gifts are immediately outside of your estate when calculating IHT. Some gifts may be included in your estate for up to seven years, so making use of these allowances might be an important IHT strategy.

In 2026/27, gifting allowances include:

• Up to £3,000 to one or more people, known as the “annual exemption”, which you can carry forward for one tax year
• Up to £250 per person, so long as another allowance has not been used on them
• Gifts for a wedding or civil partnership of £5,000 for your child, £2,500 for your grandchild or great-grandchild, and £1,000 for anyone else
• Regular gifts that come from your income. There is no limit on how much you can give, but you must be able to maintain your usual living costs after making the gift.

Reviewing your plans now means you can make them part of your budget and overall plan. It could also allow you to identify effective ways to support your family and friends.

Get in touch

Your financial circumstances and goals will affect which allowances and exemptions are appropriate for you. If you’d like to discuss how you might improve your tax efficiency in 2026/27 and work with us to create a tailored plan, please get in touch.

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 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.

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 Financial Conduct Authority does not regulate tax planning, Inheritance Tax planning or estate planning.

Building wealth without a financial plan may be like searching for a destination without a map. You might miss the most efficient route, take an unnecessary detour, or miss your intended target altogether. A clear plan could be essential for helping you reach your goals.

If you’re simply accumulating wealth, your assets don’t have a clear structure. Seeing the balance in your bank account rise can be comforting, but you’re taking a passive approach.

In contrast, with a financial plan, your assets have an intentional structure designed with your goals in mind. As a result, the decisions you make are deliberate.

If the value of your assets is rising, you might assume you’re on the right track, but creating a financial plan is often still valuable.

Why a tailored financial plan matters

1. Looking beyond the value of assets could paint a clearer picture

An increase in the value of an asset can feel like you’re on the right track to reaching your financial goals, but the number is only one part of the information you need to build a full picture.

Imagine you’re reviewing your pension and whether you’re on track for retirement. Seeing that you have £300,000 in your pension might feel good. However, that figure alone doesn’t tell you what income you might receive when you retire or when you’ll be able to step back from work.

A financial plan can help you understand what your assets could mean for your lifestyle now and in the future. It could also help you identify potential gaps and provide an opportunity to close them.

2. A financial plan may bring together multiple assets

One of the challenges of simply focusing on wealth is that you might view each asset in isolation. Often, you’ll need to bring together multiple assets to gain a clear idea of your financial health and what your options are.

Returning to the retirement planning example, you may use your pension alongside savings and investments to create an income. In addition, whether you may have debts, such as a mortgage, in retirement will affect the income you’ll need. So, if you only consider your pension, you may be missing essential details.

3. You could identify tax allowances and exemptions

Working with a financial planner could help you identify appropriate tax allowances and exemptions that might allow you to get more out of your finances.

Let’s say you’ve decided to invest £250 a month to support your long-term goals. Using a Stocks and Shares ISA could mean your potential investment returns are not liable for tax. Tailored advice might help you recognise how changes to the way you manage your finances could make them more efficient.

4. A strategy might help you measure the impact of your decisions

If you’ve not set clear goals and planned for them, it can be difficult to assess the impact of your decisions.

Working with a financial planner to create a cashflow model could provide a way to visualise your finances and how they might change over time. You can use this model to test different scenarios, so you might see the impact of adding money to your pension compared to overpaying your mortgage.

It’s important to note that the outcomes of a cashflow model are not guaranteed, but it can provide useful insights when you’re making decisions.

5. A clear plan could reduce impulsive decisions

Another benefit of understanding the effect of your decisions is that it could reduce impulsive or emotional decision-making, as you’re able to see the bigger picture.

Get in touch to talk about your financial plan

If you’d like support in creating a long-term financial plan, we’re here to help.

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.

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.

The Financial Conduct Authority does not regulate cashflow modelling or tax planning.

Once you have made an investment strategy, often doing nothing is the best course of action. Yet, it’s an approach that might be more difficult to stick to than you expect.

Investment markets often experience volatility, which could tempt investors to make decisions based on short-term emotions. These actions might not align with their strategy and could harm long-term growth.

Instead, trusting your strategy may yield higher returns over the long term. Indeed, a common financial adage is “the best investors are dead”. Rather than responding to news or short-term movements, inactive investors buy and hold assets.

On the surface, doing nothing seems like a simple investment strategy, but common financial biases can make it difficult to follow.

5 financial biases that could make doing nothing difficult

1. Action bias

A key bias that makes doing nothing challenging is action bias, which means investors favour taking fast, decisive steps over extensive planning.

As a result, doing nothing can feel negligent, rather than disciplined. Some investors might also experience a sense of lack of control if they’re not actively managing their investments. Consequently, you might feel as though you must do something, even if it could potentially harm long-term returns.

2. Loss aversion

Loss aversion theory suggests that investors feel the pain of a loss twice as intensely as the joy of gains. So, when markets fall, it can cause emotional discomfort that could push you to act. Doing nothing might compound your worries and make you feel as though you’re ignoring risks.

3. Recency bias

In many situations, people focus on the most recent events, including when considering investment performance. This is known as recency bias.

When markets fall, investors might expect them to continue doing so. This anticipation of further dips could lead investors to take action in an attempt to prevent further losses. While this might seem rational, if it’s not aligned with a strategy, it could turn paper losses into actual ones.

Similarly, recency bias could take hold when markets are performing well. When markets are up, investors might make financial decisions in the belief that the rally will continue, which could lead to some taking more risk than is appropriate for them.

4. Social pressure

Investors are exposed to constant social pressure, which could come from the news, social media, or friends. All these different opinions about what’s happening in investment markets and how you should respond could amplify the sense of urgency.

If you don’t react to social pressure, you might feel like you’re ignoring important information or missing out on a potentially lucrative opportunity. Again, it’s a form of bias that could prompt financial decisions that don’t align with your overall investment strategy or risk profile.

5. Present focus bias

Finally, present focus bias refers to the cognitive tendency to prioritise immediate rewards and the gratification that comes with them over long-term benefits. For investors, this can manifest as making adjustments to their portfolio in a bid to secure returns quickly.

Quickly turning your initial investment into a larger sum to help you reach your goals is an attractive prospect. However, for the average investor, investing should be approached with a long-term outlook that helps balance your goals with investment risk. As a result, the present focus bias could skew your perception of what you should be doing.

We could help you manage your investments

An outside perspective could help you identify when bias might be influencing your decisions. As a financial planner, we could offer this and work with you to create an investment strategy that’s tailored to your circumstances and goals. Please get in touch if you’d like to arrange a meeting.

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.

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.

Like inflation, lifestyle inflation could affect your finances, and you might not be aware of the effects straightaway. Find out how it might impede your ability to reach your goals and some ways to manage it.

Lifestyle inflation refers to the tendency for spending to increase as your income rises. Often, this spending goes on luxuries, which may come to be perceived as essentials as you become accustomed to them.

Lifestyle inflation isn’t automatically bad. Indeed, it’s normal to make changes to your lifestyle as your finances improve. However, it’s important to look at what your additional spending is going on – is it making you happier?

There is also often a tendency to focus on how an increase in income could boost your lifestyle now. Perhaps you’re looking forward to an extra holiday each year, attending fine-dining restaurants, or simply having a higher disposable income.

Yet, a boost to your finances could be used to support your long-term plans. Rather than spending it now, placing the additional money into your pension or investing through a Stocks and Shares ISA might allow you to retire earlier.

Being aware of lifestyle inflation could help you make informed decisions as your financial situation changes.

6 useful tips for managing lifestyle inflation

1. Create a budget

Creating a budget and regularly reviewing it could help you balance increasing your spending now and putting money aside for the future. It could mean you feel comfortable enjoying the results of your hard work, without worrying that you’ll derail long-term goals.

2. Allocate a use for each pot of money

Splitting your income or wealth into different pots could be one simple way to effectively manage lifestyle inflation. Having an account that only holds your disposable income could allow you to indulge guilt-free when you want to treat yourself.

You might also use other pots for essential outgoings, medium-term goals, and long-term aspirations. When your finances improve, you may then decide how to split the additional income or wealth between these different pots to support your overall wellbeing.

3. Automate your long-term savings

Unmanaged lifestyle inflation could lead you to spend more than you expect day-to-day.

One solution is to treat payments into savings or investments as an essential outgoing. You might do this by automating a payment, so it leaves your account in the same way as household bills. This could prevent you from unwittingly overspending in a way that might derail your long-term plans.

4. Avoid social comparisons

The 26th President of the United States, Theodore Roosevelt, is often attributed with the quote: “Comparison is the thief of joy.” More than a century after he’s reported to have said it, the saying still rings true.

Trying to match your lifestyle to others who appear to be living more extravagantly might mean you don’t fully enjoy what you already have. If you try to keep up, you might experience lifestyle inflation.

Remember, you often only see a snapshot of other people’s lives. Rather than comparing, try to focus on what would make you happy and the steps you could take to turn this into a reality.

5. Implement a delay before making changes

If you’re tempted to make a large purchase or a big lifestyle change, implement a delay before you proceed. A simple break could help you filter out short-term impulses, so you can instead focus on what will really have a lasting, positive effect on your life.

6. Use a cashflow model to understand the impact of your decisions

Finally, working with a financial planner to create a cashflow model could help you understand the impact of your financial decisions.

For example, after a large pay increase, you might model the effect of adding 25% of the increase to your pension on your potential retirement income. You may then look at how the outcome would change if you increased it to 50%.

By visualising how your decisions will affect long-term financial security, a cashflow model may help you strike a balance between short- and long-term lifestyle goals.

The outcomes of a cashflow model are not guaranteed as they rely on accurate data and make certain assumptions, such as projected investment returns. However, they can be a useful tool when you want to understand how different options will affect your long-term finances.

A regularly reviewed financial plan could help you assess how to use your wealth

Reviewing your financial plan as your income or assets change could identify how you might use your wealth to support your wellbeing. Please contact us to find out how we might work together.

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.

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. Past performance is not a reliable indicator of future performance.

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 Financial Conduct Authority does not regulate cashflow modelling.

Conflict in the Middle East caused market volatility throughout March 2026. Find out what other factors may have affected your investments.

While the ongoing uncertainty may feel unsettling for investors, remember that your strategy reflects your long-term goals and considers periods of volatility.

Oil prices rising and ongoing uncertainty led to stock markets falling

On Saturday, 28 February, the US and Israel began strikes on Iran, which led to markets falling when they opened on Monday 2 March.

The FTSE 100 recorded its biggest loss since November 2025 when it fell 1.2%, with airlines, luxury goods makers, and banks particularly affected. In contrast, defence stocks increased, including the UK’s BAE Systems, which was up 7% at the start of trading.

It was a similar picture in Europe. The main indices in France, Germany, Italy, and Spain were down 2.2% or more. When markets opened in the US, the Dow Jones Industrial Average and the wider S&P 500 both dropped 1%.

As the Middle East is a major oil-exporting region, conflict there led to prices rising. Deutsche Bank stated Brent crude was up 8.4%, though it added it was only the 38th largest oil spike since 1990.

The volatility continued on 3 March, with the FTSE 100 recording the biggest daily loss in 11 months when it fell 2.75%. Germany’s DAX (-3.6%), France’s CAC 40 (-3.5%), and Italy’s FTSE MIB (-3.9%) also suffered losses.

Asia-Pacific markets weren’t immune to the effects of the war in Iran either. Japan’s Nikkei index fell 3.6%, and South Korea’s KOSPI was down 12% on 4 March due to concerns about shipping through the Strait of Hormuz, a key sea passage for trade, particularly for oil.

On 11 March, the International Energy Agency proposed the largest release of oil reserves in history to bring crude prices down. The news led to Asian shares climbing, with the main indices in Japan and South Korea rising by 1.4%.

However, energy fears continued to influence European markets. On 16 March, the FTSE 100 was down by 1.9%, and the index’s 2026 gains were wiped out on 20 March.

Markets briefly rallied on 23 March following news that negotiations would take place between the US and Iran. However, there were conflicting reports that led to confusion. Despite this, US markets improved, with the Dow Jones up 2%, and construction equipment firm Caterpillar leading the way with a 4.4% rise.

UK

The Office for National Statistics said the UK economy stagnated in January 2026. The data suggests the economy was weakening even before the effects of the conflict in the Middle East were felt. Furthermore, inflation in the 12 months to February 2026 was 3%, stubbornly sticking above the Bank of England’s (BoE) 2% target.

The British Chambers of Commerce commented that the UK is stuck in a “low-growth pattern”, after the 2026 GDP forecast was downgraded from 1.2% to 1%. The organisation said the revised estimate reflects weak productivity, subdued investment, and cautious consumer spending.

At the start of March 2026, Chancellor Rachel Reeves delivered the government’s Spring Statement. In it, she said inflation would fall faster than expected, economic growth would pick up in 2027 and 2028, and there was headroom in the budget.

However, the calculations were made before the conflict in the Middle East began, which is expected to affect the economic outlook.

For instance, rising energy prices could influence inflation. Indeed, the Office for Budget Responsibility estimated the Iran war would add 1% to UK inflation this year. In turn, high inflation may lead to the BoE increasing interest rates, which would place pressure on consumers and businesses.

Data from S&P Global’s Purchasing Managers’ Index (PMI) was positive for the manufacturing and service sectors.

In February 2026, the manufacturing PMI continued to grow, recording a reading of 51.7 – a figure above 50 indicates growth – and a rise in business both at home and abroad. The service sector fell slightly compared to the previous month to 53.9, but still shows growth.

In contrast, the construction sector fell to 44.5 in February, which marked 14 consecutive months of contraction.

Europe

Across the eurozone, the annual inflation rate was 1.9% in February 2026, up from 1.7% a month earlier, and very close to the European Central Bank’s (ECB) 2% target.

The ECB opted to hold interest rates in March, but warned that uncertainty could lead to higher inflation and pose risks to economic growth, which might lead to higher interest rates in the coming months.

The European Commission consumer confidence survey highlights this fear among consumers, with the reading falling amid worries that the Iran war could drive up energy costs.

The S&P flash report on output in the eurozone fell to 50.5 in March, down from 51.9 in February. The reading represents a 10-month low, and it is close to the 50 mark, which signals stagnation.

US

As expected, inflation in the 12 months to February 2026 remained stable at 2.4%.

However, data from the Bureau of Labor Statistics was less positive. The US economy lost 92,000 jobs in February, which could be a sign that the market is cooling, and the ongoing conflict might lead to businesses taking a more cautious approach in the coming months.

A consumer sentiment survey carried out by the University of Michigan indicates that the Iran war is already influencing how confident people feel about their financial future. The reading fell from 56.6 in February to 55.5 in March.

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.

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.