As the end of the tax year approaches, Will Godsave, Head of Financial Planning at Credo, explores the challenges many insurance brokers face as they juggle running a successful business, and keeping personal and family finances tax efficient.
With consolidation and M&A activity still strong across the sector many brokers have built up significant cash, whether from retained profit, partial or full exits or earn-out structures. This can make income more complex and increase the impact of year-end decisions on long-term financial outcomes.
Rather than a last-minute scramble to use allowances, tax year end is a valuable opportunity to step back, review structures, and make sure personal, family and business arrangements remain aligned with both current legislation and long-term goals.
Below are some of the most relevant considerations for those people who are directors or shareholders of their broking business.
Review interest on cash: are you paying too much tax?
Many brokers hold substantial cash balances, either personally or across family structures. With interest rates higher, cash can feel attractive, but interest earned outside tax-efficient wrappers may be taxed at up to 45%.
A year-end review should assess whether all cash genuinely needs to remain in its current form, especially where it is not required in the short term.
Questions to consider include:
- How much interest is being lost to tax each year?
- Is the cash required for short-term liquidity or long-term capital?
- Is it held in the most tax-efficient structure available?
For surplus cash, alternatives such as qualifying government bonds can provide cash-like characteristics with materially improved after-tax outcomes for higher earners. Reducing unnecessary taxable interest before the new tax year can be a simple but effective planning step.
ISA contributions: think beyond your own allowance
Most directors and shareholders are familiar with the £20,000 annual ISA allowance, but planning becomes far more effective when viewed across the whole family.
Using ISA allowances for spouses, partners and children can:
- Shelter investment gains and income from tax
- Build flexible capital for future needs
- Reduce eventual inheritance tax exposure.
Junior ISAs, with allowances of up to £9,000, are especially valuable for long-term family wealth planning. Where funds are intended for growth rather than immediate access, investment ISAs are often more suitable than cash ISAs.
Pensions: still one of the most powerful tools for high earners
Despite ongoing changes, pensions remain one of the most effective planning tools for higher and additional rate taxpayers. Up to £60,000 gross can be contributed each year, and unused allowances from the previous three tax years can be carried forward.
For business owners, employer pension contributions are an extremely efficient part of the remuneration strategy. As well as the tax savings, funding can:
- Improve long-term financial resilience
- Reduce marginal tax rates
- In some cases, restore eligibility for benefits such as Child Benefit.
Business Relief changes: a growing issue for broker owners
For owners of insurance broking businesses, recent and forthcoming changes to Business Property Relief require careful attention, particularly given the strong valuations across the intermediary market. From April 2026, the value of qualifying assets eligible for 100% Inheritance Tax relief will be capped, with excess value subject to a reduced, but still material, IHT charge.
For many brokers, shareholdings have grown significantly in value either through organic growth or M&A activity. The new rules could create IHT exposures that previously did not exist. This in turn can create liquidity challenges for beneficiaries who inherit an illiquid asset, such as shares in a private insurance broker.
Tax year end planning provides an opportunity to:
- Model potential Inheritance Tax liabilities under the changes
- Review share and ownership structures
- Assess future liquidity needs for successors or beneficiaries
For some owners, longer-term solutions such as insurance to provide liquidity, or using trusts and lifetime gifting to reduce exposure, may be worth exploring well before the rule changes take effect.
Remuneration strategy: salary, dividends and pensions
As the tax year closes, shareholders should reassess the most tax efficient way to extract income from the business. With many firms generating strong profits, the choice between salary, dividends and employer pension contributions can have a material impact on both personal tax and business cash flow.
A coordinated review can help ensure, for people that are working in the business:
- Personal and spousal allowances are used efficiently
- Dividend thresholds are managed efficiently, particularly where multiple family shareholders exist
- Pension funding is structured to support both retirement planning and overall tax efficiency.
For many business owners, this can reduce the overall family tax burden without undermining cash flow.
State Pension credits: don’t overlook the basics
With the focus often on business valuation, remuneration and exit planning, State Pension entitlements can easily be overlooked. Reviewing National Insurance records for non-working spouses or family members can highlight gaps that are relatively inexpensive to address but valuable over the long term. Where people have gaps in their records due to periods of not working voluntary contributions can represent excellent value when incorporated into a wider retirement strategy.
Tax year end planning: a structured approach beats last-minute decisions
For directors and shareholders, tax year end planning is most effective when part of a structured review rather than a reactive exercise. Bringing together considerations such as cash holdings, family allowances, pensions, ownership structure and long-term objectives and succession goals allows for clearer, more confident decisions.
Approached properly, tax year end should offer clarity rather than complexity. By acting early you can enter the new tax year with cleaner structures, improved tax efficiency and a financial plan aligned with both the growth of the business and long-term family security.
If you would like advice on any of the issues raised in this article, please contact Stephen Kenny and Will Godsave.
