This strategy will benefit you if you’re a UK limited company owner, freelancer, or contractor and want to build wealth efficiently while keeping your lifestyle simple.

Minimalist life focus

• Strip your business and personal life back to the essentials – Reduce subscriptions, gadgets, and business expenditures which don’t earn money.
• Understand the 80 / 20 rule – 20% of your work will equal 80% of your income, and the remaining 80% equals an ineffective 20% of your income. Reducing ineffective income can free up your time to earn more productive income.
• Avoid splurging on unnecessary expenditures if you have a good year – Keep your life and business lean and let your profits work towards your future. There’s no guarantee next year will be as profitable.

Financial strategy

• Use your company to make direct contributions to your SIPP – Employer contributions are tax-deductible, reduce your corporation tax, and don’t touch your personal tax bands.
• Find the optimal balance of pay, dividends, and pension payments – As a general rule, if you can pay low tax to pay yourself from the company via salary or dividends, then do that. Avoid high taxes by contributing to your SIPP instead.
• Keep a business emergency fund – This can protect you during slow months (depending on the type of business).
• Think of your pension fund as your business partner – The more you contribute now, the less you’ll rely on the business later in your life.

Your goal

Reduce unnecessary expenditure now (both personal and business related) even if your business is making a healthy income. This allows you to live on less, allowing you divert what would be taxed highly into your private pension.