I’ve worked with many entrepreneurs over the years and the same mistakes crop up again and again.
Here are ten of the most common – and some thoughts on how to avoid them.
1. Treating the business as the pension
It’s tempting to think: “One day, I’ll sell the company and that will fund my retirement.” But relying on one illiquid asset is dangerous. Markets shift, valuations fluctuate, and sales often don’t happen on the owner’s timeline. A proper retirement strategy needs diversified assets built up well before exit day.
2. Not using the most tax-efficient structures
This one still surprises me. So many entrepreneurs have ISAs, maybe a GIA, sometimes nothing at all. Meanwhile one of the most tax-efficient vehicles available to UK residents – the International Portfolio Bond – flies under the radar. It lets investments grow without the annual tax drag, allows 5% tax-deferred withdrawals, and can be assigned between family members for succession planning. It’s not some niche offshore gimmick; it’s a mainstream structure most accountants know about but rarely bring up.
3. Overprotecting the company, under protecting the family
I’ve seen businesses with layers of insurance for every eventuality – buildings, liability, key person. Yet the owner’s own life cover is outdated or non-existent. If something happens to you, the company might survive but your family may not be able to pay the bills. Family protection should be at least as solid as business cover.
4. Blurring company and household money
Swipe the business card for family groceries? Pay school fees from the company account? It happens more than people admit. Besides giving your accountant headaches, it makes it impossible to see what’s really available for long-term planning. Treat your company as a client of the family finances, not the family piggy bank.
5. Kicking the can on succession planning
Nobody likes to think about it, but what happens if you’re suddenly not around? Too often there’s no shareholder agreement, no trust, sometimes not even a will. That leaves families and business partners in a mess. Set out who owns what, who makes decisions, and how shares pass on. It’s one of those jobs you only regret not doing.
6. Forgetting to keep cash outside the business
Entrepreneurs are conditioned to reinvest every penny. Admirable, yes. But when a business hits a dry spell, the family can be left scrabbling. Keep six months’ personal expenses liquid – boring, but it means you’re not forced into bad decisions when times get tough.
7. Writing off pensions too soon
Many owners see pensions as dull or inflexible compared with reinvesting in the company. The truth is they remain one of the most tax-friendly routes in the UK. Employer contributions reduce corporation tax, growth is sheltered, and the pot is generally outside the estate for IHT. Even small, steady payments can compound into a serious safety net.
8. Forgetting the 40% inheritance tax trap
Entrepreneurs often build sizeable estates without realising how exposed their families are to inheritance tax. Anything over the allowances is hit at 40%. That could be millions going to HMRC. Trusts, family investment companies, and investment bonds can all help – but only if you plan years in advance, not in a panic later on.
9. Missing out on spouse and kids’ allowances
This one is almost boring, yet it costs families thousands. All too often, one spouse holds everything while the other has nothing. Meaning multiple allowances go unused. By spreading assets, you can use both income tax bands, two sets of CGT exemptions, and of course two ISA limits every year. It’s simple arithmetic, but ignored surprisingly often.
10. Waiting until it’s too late
And finally, the big one: procrastination. Owners promise themselves they’ll sort the family finances “after the exit” or “next year”. Then illness strikes, tax rules change, or markets turn against them. Good planning runs alongside the business journey, not after it. Just like you wouldn’t run a company without a budget, you shouldn’t run a family without a plan.
Final Thoughts
Entrepreneurs are used to seeking expert advice in business – accountants, lawyers, mentors, non-execs. Oddly, when it comes to personal finances, many go it alone. Yet just one well-designed structure, such as an International Portfolio Bond, can save tens of thousands in unnecessary tax over a lifetime.
The point isn’t to be clever or technical. It’s to give your family the same security and resilience you’ve been trying to build in your business. Avoiding these ten mistakes is a good place to start.
