5 Smart Financial Moves Every UK Business Owner Must Make in 2026
- Jamie Flook
- Jan 4
- 7 min read
You’ve created a high-performing business. But is your personal wealth keeping pace?”
We specialise in helping Business Owners and Directors whose personal wealth hasn't yet started moving as fast as the business headline numbers. Our job is to help you master that transfer of wealth.
In 2026, with dividend tax rising, exit reliefs changing, and pensions rules reshaped, it’s essential to have a clear, UK‑specific plan for turning company success into long‑term personal prosperity and security.
Here’s how to make 2026 the year your hard work pays off personally.
1) Pay yourself strategically (salary, dividends, and timing)
Are your remuneration and extraction methods still efficient under new 2026 tax rules?
The classic director setup: modest salary and the rest in dividends, still works, but the numbers have shifted.
Dividend tax rises from April 2026: basic rate from 8.75% to 10.75% and higher rate from 33.75% to 35.75% (additional rate stays 39.35%). The tax‑free dividend allowance remains £500. [gov.uk], [which.co.uk]
Practical takeaway: re‑run your salary/dividend blend and dividend timing for 2026/27. If you’ve leaned heavily on dividends, your net take‑home will drop; restructuring could soften the impact. [gov.uk]
Directors should also remember the corporation tax bands when modelling remuneration: 25% main rate with a 19% small‑profits rate and marginal relief for profits between £50k and £250k (still in place for FY2026). [gov.uk], [legislation.gov.uk]
2) Keep business and personal money cleanly separated
Have you got a grip on your personal and business finances - where one starts and the other ends?
It sounds basic, but ring‑fencing business cash from personal finances is the foundation for smarter extraction and risk control:
Dedicated business accounts and clear bookkeeping make profit extraction decisions easier (salary, dividends, pension contributions).
Cleaner records also help when you model cash flow, margins, and exit readiness.
(If you want a deeper read on why separation matters and how directors are formally responsible for keeping the company compliant, see UK guides on directors vs. shareholders responsibilities.) [businesswealth.org], [strikingly.com]
3) Business owners - use pensions to convert profits into tax‑efficient personal wealth!
Are you using your pension? or are you missing out on this truly tax-efficient supercharged way to turn business wealth into personal wealth?
For many owners, pensions are the most powerful bridge from company profits to long‑term, diversified personal wealth:
Employer (company) pension contributions are usually deductible against profits if they meet the “wholly and exclusively” test, reducing corporation tax while funding your future. Timing matters: relief applies in the period paid. [gov.uk], [adviser.ro...london.com]
The annual allowance remains £60,000 (subject to taper and Money Purchase Annual Allowance). A good strategy is to make contributions that you know are affordable each month, say a few hundred pounds, then when you get close to your company year end, see if you can make a large lump sum contribution. This will simultaneously save corporation tax and divert more from your company wealth to personal wealth for retirement. [eapf.org.uk]
Since April 2024, the Lifetime Allowance is abolished. Instead, you have a Lump Sum Allowance of £268,275 and a Lump Sum & Death Benefit Allowance of £1,073,100 governing how much tax‑free cash you can take across your lifetime. Consider this when thinking about how much to contribute into pension in total. [gov.uk], [gov.uk]
Why this matters in practice
Company contributions can reduce this year’s corporation tax while building a protected, diversified asset outside the business. With the LTA gone, planning focuses on withdrawal allowances and long‑term portfolio design rather than the fear of breaching a lifetime cap. [gov.uk]
4) Build (and use) tax‑efficient personal wrappers: ISAs + general investments
Are you using ISAs? they can blend beautifully with pensions to provide long-term tax-efficient capital and a blend of tax-efficient income in retirement.
Don’t let all your wealth sit in one asset - your company. Use tax wrappers:
The overall adult ISA allowance is £20,000 in 2025/26 and 2026/27 (you can split across Cash, Stocks & Shares, Lifetime, or Innovative Finance ISAs). [gov.uk]
From April 2027, the Cash ISA limit is set to drop to £12,000 for under‑65s (overall ISA allowance still £20,000). Expect new rules to prevent sidestepping the lower cash limit. [independent.co.uk], [which.co.uk]
A practical approach for owners: hold short‑term reserves in Cash ISAs (up to the cap), and deploy the rest in Stocks & Shares ISAs for long‑term compounding, alongside a general investment account for overflow and flexibility.
This blog illustrates examples where we've helped out clients utilise these brilliantly as part of their financial plan: What should I do with my company profits?
5) Plan your exit early (BADR is changing again in 2026)
Whether you're planning on exiting in 2026, or not, you'll exit at some point. Have you thought much about what that looks like?
If part of your personal wealth plan involves selling the business, the tax on qualifying gains under Business Asset Disposal Relief (BADR) has moved—and moves again next year:
BADR rate rose to 14% for disposals from 6 April 2025. It’s due to increase to 18% for disposals from 6 April 2026 (with anti‑forestalling rules that can re‑date disposals where contracts were used mainly to lock in a lower rate). Lifetime limit stays £1m. [gov.uk], [bdo.co.uk]
Translation: timing matters. Completing before April 2026 can mean a lower tax bill on qualifying gains; leaving everything to month‑end could cost you. [gov.uk]
For many owners, blending pension funding now with a well‑timed exit later improves both risk and net outcome.
Planning your exit?
Timing could save you thousands. Let’s map it out together, book in a chat here:
Putting it all together (2026 game plan)
Step 1: Re‑run your remuneration plan
Model 2026/27 salary/dividend scenarios with the higher dividend rates and corporation tax bands. Optimise by timing dividends, considering a slightly higher salary, and folding in employer pension contributions. [gov.uk], [gov.uk]
Step 2: Systemise pension funding
Set a monthly or quarterly employer contribution cadence aligned to cash flow, staying within the annual allowance and the “wholly and exclusively” rule. [gov.uk], [eapf.org.uk]
Step 3: Diversify outside the business
Use the ISA allowance first; plan for the 2027 Cash ISA change; top up a long‑term, globally diversified portfolio to reduce concentration risk. [gov.uk], [which.co.uk]
Step 4: Map your exit window If you’re targeting a sale in the next 12–24 months, plan around BADR’s step‑up to 18% in April 2026 and anti‑forestalling rules. Start early on valuation, structure, and buyer pipeline. [gov.uk]
Want more on turning business wealth into personal wealth?
If you’re weighing whether to retain profits or fund pensions, our explainer breaks down scenarios and tax outcomes: What should I do with my company profits?
If budget and tax changes are on your mind, see: What the 2025 Budget means for Business Owners (and what to do next).
For a more personal take on time vs money, read: The Lessons From A Person Who Suddenly Took 5 Years Off and The Story of Ronald Read and the Magic of Compounding.
You can also download your free copy of the Business Owner's Guide to Financial Independence here through our sister company Biz Owner Wealth:
Final thought
Overall, there's good news and bad news.
The bad news is that there is no silver bullet. Sorry.
The good news is that there is a tried-and-tested formula for turning business success into personal wealth; it’s about consistent, well‑timed decisions across pay, pensions, wrappers, and exit planning.
Get the blend right, and 2026 can be the year your personal finances really start to reflect the effort you pour into your business.
Ready to make 2026 your most profitable year personally? Book your free introductory call now: https://calendly.com/labfp/intromeeting
Jamie is Lab Financial Planning Managing Director, and a Certified Financial Planner™.
He advises business owners to help with their tax-efficient financial planning, and ensuring that they and their family are well protected, in any scenario.
If you'd like to discuss your financial planning, why not get in touch to see if we can help?
Remember, there are no stupid questions. Everyone has a different level of knowledge about money and planning their finances. We speak in plain English to help take away the fear and empower you to use your money well.
You can drop Jamie an e-mail here: jamie@labfp.co.uk
Or, you can book in a free introductory call, to discuss your situation, here: https://calendly.com/labfp/intromeeting
The information contained within this blog post should not be taken as financial advice, as it does not take account of personal circumstances, which would affect advice given. Should you wish to talk to us about personalised advice for you, we'd be happy to do so.
Tax rates are based on the tax year 2025/26.
Regulatory note: Lab Financial Planning Limited is an Appointed Representative of ValidPath Ltd, authorised and regulated by the FCA. This blog is educational and does not constitute personal financial advice.
FAQ
1. What’s the most tax-efficient way to pay myself as a business owner in 2026?
For most UK directors, a combination of a modest salary and dividends remains efficient, but dividend tax rates are increasing in April 2026. Review your salary/dividend mix annually and consider pension contributions for additional tax relief.
2. How much can my company contribute to my pension?
Employer contributions are usually deductible against profits if they meet HMRC’s “wholly and exclusively” rule. The annual allowance is £60,000 (subject to tapering), and the Lifetime Allowance has been abolished—so planning focuses on lump sum limits instead.
3. Should I leave profits in my company or extract them?
It depends on your goals. Retaining profits can support growth or future sale value, but extracting funds tax-efficiently (via pensions, dividends, or ISAs) helps diversify your wealth outside the business and reduce risk.
4. What is Business Asset Disposal Relief (BADR) and why does it matter?
BADR reduces the tax rate on qualifying business disposals. From April 2026, the rate rises to 18% (currently 14%), so timing your exit could save thousands. Lifetime limit remains £1 million.
5. How can I start building personal wealth without selling my business?
Begin with tax wrappers like ISAs and pensions, diversify investments outside your company, and plan profit extraction strategically. These steps reduce reliance on a single asset—your business—and build long-term security.
6. Do I need a financial planner for this?
While you can research options yourself, a planner ensures your strategy is tailored to your goals, tax position, and exit plans. We help UK business owners model scenarios and make confident decisions.
Next Steps: 👉 Download your free guide: The Business Owners Guide to Financial Independence 👉 Book a free 20-minute call to see how these strategies apply to your business: https://calendly.com/labfp/intromeeting
