Your business may be one of the most valuable assets to your name – but this doesn’t mean it’s wise to rely entirely on its value to fund your family’s future.

If you plan to sell your business upon retirement and use these funds to sustain your lifestyle, you’re not alone. Wealth and Finance reports that 30% of business owners plan to do the same, and 49% want to partially transfer the business to family members while continuing to draw an income from it in retirement.

While either may turn out to be an excellent strategy, relying on the continued high value of your business to fund your retirement might be a risky move. If the value of your business decreases for any number of reasons, this could have a serious impact on your retirement prospects.

Moreover, it’s important to consider how you can extract wealth from your business throughout its life span, not just when it’s time to sell up or pass the reins to the next generation.

Here are three wealth extraction strategies to consider for business owners.

1. Pay yourself a salary

You might be reluctant to pay yourself a salary as a business owner, especially if you’re focused on ensuring the business remains solvent and builds capital. Despite these doubts, a salary could offer you the best of both worlds: wealth extraction to benefit your personal circumstances, and tax efficiency for your business too.

On a personal level, a consistent salary may help you to:

• Save and invest your personal wealth
• Make all-important pension contributions (more on this later)
• Support your family financially
• Pay National Insurance contributions (NICs) that boost your State Pension entitlement
• Gain financial peace of mind as you approach retirement.

And, as you may know, employee salaries are an “allowable expense” that can help you cut your business’s Corporation Tax bill. In paying yourself a regular salary, you could actually improve your company’s finances rather than hurting them.

2. Make consistent pension contributions

If you are self-employed or a sole trader, you could be one of the 80% who do not have a private pension, according to an Enterprise Nation report.

After all, if you are planning to retire in the coming decade, all your attention could be placed on readying your business before it changes hands. But ignoring the importance of building pension wealth in the meantime could leave you with a worrying shortfall when the time comes.

This is especially true considering that the cost of retirement is rising. The Pensions and Lifetime Savings Association (PLSA) reports that as of 2024:

• The “minimum standard of living” in retirement now costs £14,400 a year, or £22,400 for a couple. This includes one week-long holiday in the UK a year, £95 a week for groceries, and relying on public transport instead of having a car.
• A “moderate” lifestyle now requires £31,300 a year for a single person or £43,100 for a couple, including eating out once a week, a week-long holiday in Europe each year, and running a small second-hand car.
• A “comfortable” retirement now costs £43,100 a year for a single person or £59,000 for a couple. This accounts for regular activities like theatre trips, two weeks’ holiday abroad each year, and regular meals out.

So, if the value of your business diminishes between now and when you wish to retire, your quality of life in retirement could be jeopardised.

On the other hand, if you have saved and invested consistently into a personal pension, you could enter retirement with a more reliable income strategy.

Remember: as of the 2025/26 tax year, most earners can pay up to £60,000 (gross) into a private pension without these contributions being subject to a tax charge. This is called your Annual Allowance, and it may be reduced if your earnings exceed certain thresholds or you have already flexibly accessed your pension.

With this in mind, it may be useful to begin making consistent contributions that make use of your Annual Allowance, if you don’t already. As a business owner, these savvy investments could give you greater peace of mind when you eventually retire.

3. Run allowable expenses through your business

You might be reluctant to run the appropriate expenses through your business, but doing so could lighten the burden on your personal finances and allow you to extract wealth tax-efficiently.

For example, if you have a car you use for work, putting these expenses through your business could free up more personal wealth and allow you to save and invest more effectively.

Similarly, you could think about taking out life insurance through your business, known as a “relevant life plan”. This death-in-service benefit functions very similarly to other types of life insurance: if you pass away while employed by the business, your family could receive a tax-free lump sum to help them cover costs.

Paid for by your business and counting as an allowable expense, a relevant life plan could help to reduce your personal outgoings while still providing the financial protection your family may need in future.

What’s more, as you read earlier, allowable expenses deduct the amount payable in Corporation Tax for many businesses. So, while ensuring your personal wealth is secure, you could simultaneously be making your business more tax-efficient.

Get in touch for bespoke advice on your personal finances

If you’re heading towards retirement as a business owner, there is so much to think about.

I offer bespoke personal wealth advice that helps busy, successful people like you gain financial peace of mind and plan for a prosperous future.

Email me on a.douglass@grosvenorconsultancy.co.uk or call my office on 01793 766 123. Alternatively, call my mobile on 07525 177 046.

While I offer high standards of service and will work with you to ensure any plan is right for you, I’m also a busy mum, so work Mondays and Tuesdays only.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

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. 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.

Workplace pensions are regulated by The Pension Regulator.

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.