Financial Planning Tips for Directors and Shareholders in Ireland

As a company director or shareholder in Ireland, your financial landscape differs significantly from that of PAYE employees, bringing unique opportunities and challenges around income, tax, investments, and retirement. This guide outlines practical strategies to help you manage these complexities, protect your wealth, and make informed long-term decisions.

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1. Optimise Your Director's Salary and Dividends

One of the key advantages of being a director-shareholder is the flexibility in how you pay yourself. Getting the balance right between salary and dividends can significantly impact your tax liability and pension contributions.

• Salary: Subject to PAYE, USC, and PRSI, but counts toward your pensionable earnings.
• Dividends: Paid from after-tax profits and not     subject to PRSI, but do not allow for pension contributions.

Top Tip: Take a modest salary to optimise pension contributions and PRSI entitlements, and use dividends to supplement your income tax-efficiently.

2. Use Company Profits for Long-Term Wealth Building

Rather than extracting all profits from your company each year, consider retaining surplus profits and using them for investment purposes:

• Corporate Investment Accounts: Companies can invest in multi-asset funds, fixed income, or equities. Growth is taxed under Exit Tax (currently 25%) rather than CGT.
• Holding Companies: May offer additional flexibility and tax efficiency if you're planning to sell your trading business in the future.

Caution: Passive income (e.g. rental income) earned by a trading company can impact its status and may trigger additional tax liabilities.

3. Maximise Pension Contributions

Company directors have one of the most powerful pension planning tools available: employer-funded Executive Pension Plans (EPPs) or PRSA contributions.

• Company Contributions: Are deductible as a business expense and do not count towards your personal income limits for tax relief.
• Tax-Free Growth: Investment gains within the pension grow tax-free.
• Retirement Lump Sum: Up to €200,000 can be drawn tax-free at retirement, followed by the next €300,000 at 20%.

We can help you calculate the maximum allowable pension contribution each year based on your age, salary, and years of service.

4.Understand CGT Implications for Share Sales

If you plan to sell your business, understanding Capital Gains Tax (CGT) reliefs is essential:

• Entrepreneur  Relief: Reduces CGT rate to 10% on the first €1 million of gains.
• Retirement Relief: Available from age 55, allows relief from CGT on business disposals up to €750,000 (or €500,000 if disposing to someone other than a child).

It is important to note that these reliefs are not automatic, planning ahead and structuring your affairs well in advance of a sale is crucial.

5. Build a Personal Investment Strategy Outside the Company

While reinvesting through your company has its advantages, it is also important to build personal wealth independent of your business. This creates flexibility and buffers personal risks.

Consider:

• Multi-Asset Funds: Diversified and suitable for long-term growth.
• Exchange Traded Funds (ETFs): Low-cost and tax-efficient under certain structures.
• Real Estate: An asset class with both income and capital growth potential, but one that comes with specific tax considerations.

Note: Personal investments are typically taxed under CGT (33%) or Exit Tax (41%), depending on the structure.

6. Have a Business Succession or Exit Strategy

Directors often focus on business growth, but exit planning is just as vital. Whether your goal is to retire, pass the business on to family, or sell externally, planning early ensures smoother transitions and tax efficiency.

Key steps:

• Identify your desired timeline.
• Evaluate your eligibility for CGT reliefs.
• Review company structure (is a holding company needed?).
• Consider life cover or key-person cover for risk management.

Good succession planning is not only about tax but also protecting the legacy and continuity of the business.

7. Estate and Inheritance Tax Planning

As a shareholder or business owner, you need to plan proactively for Capital Acquisitions Tax (CAT):

• Thresholds: Children can inherit up to €400,000 tax-free; anything above is taxed at 33%.
• Business Relief: May reduce the taxable value of business assets by 90% under certain conditions.

Strategies Include:

• Lifetime gifting to reduce the size of your taxable estate.
• Using a family partnership or trust.
• Life assurance to cover inheritance tax liability.

We recommend early planning as this allows better use of thresholds and access to reliefs.

8. Don’t Forget Personal and Business Protection

Your role as a director or key shareholder often means you are a central figure in the business. If something were to happen to you, the business and your family could suffer.

• Key Person Insurance: Protects the company against financial loss if a key director dies or becomes seriously ill.
• Co-Director Insurance: Ensures funds are available to buy out a deceased director's shares.
• Income Protection: Offers personal income security if you're unable to work.

9. Keep Personal and Company Finances Aligned

Too often, directors don’t think of their company as part of their personal financial plan. Integrating both sides gives a full picture of your net worth, income needs, and future goals.

Best practices:

• Annual financial reviews.
• Cash flow forecasting.
• Aligning pension and investment strategies with business performance.

Understanding the twofold nature of personal and corporate finances is where we come in.

10. Stay Updated on Irish Tax and Regulatory Changes

Ireland’s tax landscape is evolving, especially with international pressures around corporate taxation and pension reform.

Key considerations:

• PRSA contribution limits have changed.
• New rules around auto-enrolment.
• Corporate Exit Tax and anti-avoidance measures.

We recommend annual reviews to ensure strategies are compliant and current.

To conclude, directors and shareholders in Ireland enjoy a range of powerful financial planning tools, but these also come with complexity. With strategic planning, professional advice, and ongoing reviews, you can turn this complexity into opportunity.

Our team specialises in working with directors, shareholders, and business owners across Ireland. Whether you're scaling, planning to exit, or simply securing your retirement, now is the time to align your business success with long-term personal security.

We offer tailored strategies that work. Contact us today to schedule a confidential consultation.

The content of these blog posts is for general information only and should not be taken as personal financial advice. Before making any financial decisions, it’s always wise to speak with a qualified financial adviser. Mamcol Limited t/a Trust Matters accepts no responsibility for actions taken based on the information shared in this blog post.

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