Shane Tobin
CEO , True Wealth
Extract wealth from your business efficiently using income strategies, pension planning and tax advice.
With the right advice, business owners can grow wealth and reduce their tax burden. In our client’s scenario below, we believe seeking our advice was worth €904,000, as it generated €460,000 in additional pension growth and €444,000 in tax savings (including income tax, capital gains tax and corporation tax).
Power of financial advice
‘Time is money’ is a common statement. However, the reality is that today is that smart strategy can drive real results, making expert financial advice essential. According to the 2023 Value of Advice Report by Brokers Ireland:
- Individuals who received financial advice had 60% more in savings and investments (€71,332 vs. €44,754).
- Their pension pots were 55% larger with financial advice, which could mean having €1,300,000 compared to €840,000, a difference of €460,000.
- 58% of those who received advice felt more confident and in control of their finances.
Tax-efficient wealth extraction
Taking money from your business isn’t as simple as a salary or dividend; these methods often come with high tax costs.
- Salary: Subject to income tax, pay-related social insurance (PRSI) and universal social charge (USC), totalling up to 52%.
- Dividends: Taxed up to 52%, including PRSI and USC.
- Company assets for personal use: Using company funds to purchase a car for personal use, for example, can trigger Benefit-in-Kind (BIK) and a charge of up to 30%.
More efficient options include:
- Pension Contributions: A company can contribute to a pension with no PRSI, USC or BIK. Pension grows tax-free, and contributions are tax-deductible. You can withdraw 25% as a tax-free lump sum when you retire. Since 1 January 2025, PRSA contributions are capped based on salary.
- Hiring Family Members: You can employ your spouse or adult child and lower your tax bill, with their salary and pension contributions reducing corporation tax.
- Employment Investment Incentive Scheme (EIIS): This benefits companies by offering up to 40% tax relief on investments in qualifying Irish businesses, up to €250,000 (four years) or €500,000 (seven years).
Taking money from your business
isn’t as simple as a salary or
dividend; these methods often
come with high tax costs.
Exit efficiently
If you consider stepping away from your business, having a strategic tax plan can reduce capital gains tax (CGT) through reliefs such as:
- Entrepreneur Relief: This relief can reduce CGT from 33% to 10% on the sale of qualifying business assets, up to a €1 million lifetime limit.
- Retirement Relief: You get full relief when selling at 55–65. After that, it’s capped at €3 million.
What this looks like in real life
Our client Tom* runs a successful business, earning €100,000, with his spouse earning €75,000 as an employee of the business. Tom consulted us to structure the transaction in a tax-efficient manner prior to selling the company for €1.5 million. We advised them to contribute 20% (max allowable by age) of their salaries to PRSAs, €20,000 for Tom and €15,000 for his spouse, resulting in €14,000 in annual income tax savings.
Additionally, their company paid 100% of their salaries as employer PRSA contributions, which resulted in annual Corporation Tax savings of almost €22,000. In addition, we helped them save €58,000 in CGT annually on the planned business sale. Combined, these created €80,000 in annual savings, totalling €240,000 over three years.
Smart planning boosts wealth
When Tom sold the business, he qualified for Entrepreneur Relief, reducing CGT on the first €1 million from 33% to 10%, resulting in a further saving of €230,000. After taking our investment advice, Tom’s pension portfolio grew from €840,000 to €1.3 million, an increase of €460,000, in line with the 55% uplift shown in industry research.
In total, the strategy delivered €444,000 in tax savings and €460,000 in pension growth, €904,000 overall, highlighting the impact of timely, expert financial planning. Building a business takes dedication, and protecting its value takes smart planning.
If you’re a business owner looking to grow your wealth, get a quote on www.truewealth.ie. With expert guidance from True Wealth, you can protect and maximise what you’ve worked so hard to build.
*Disclaimer: ‘Tom’ is a fictional client used for illustrative purposes only. The figures and outcomes shown are based on indicative scenarios and should not be taken as financial advice. Individual circumstances vary. Please seek personalised advice from a financial advisor.
