Susanne then asked Chris:

“Coming to you, we’ve got lots of founders here in the room, and we’ve had so many new tech changes in the last few years.”

“Given the changes, can you summarize the best way to launch a business in the world?”

Chris Blundell:

“…I think the best strategy with all businesses is about being clear from the start on the structure in relation to your needs and the journey you hope to take through growth and potentially an exit if that’s what you want. Companies are generally a better way of doing things with numerous benefits compared to being a sole trader or even forming a partnership.”

“Partnerships have their place, whether limited or unlimited, but on the whole, most people choose companies because companies are the best way forward.”

Companies provide you with protection as an investor and as an owner; your losses are limited to what you put into the company. Also, the tax rate in a company is lower than it would be for an individual. As a sole trader or as a partner in a partnership, like me, you will be paying 45% tax and national insurance on top of that on your earnings.

In a company, the rate of tax on the company itself, corporation tax, is 25%. Admittedly, once the company makes profits, those profits are in the company, and the next trick is how to get the money out of the company in such a way as to be tax-efficient. While it’s in the company, the best way forward is always to claim all the expenses that you can.”

“…So, whether the expenses you are claiming are capital allowances and the annual investment allowance, that’s a 100% claim in both cases on anything you want to, any tech, any equipment that you purchase, you can set it off against the business profits. And even if you’re making a loss, don’t worry about that because the capital allowances can be carried forward to a future year to be offset against future profits as and when you make them.”

“In terms of other things to do, as David mentioned, putting money into a pension is a good way, once you’re making profits. Rather than paying tax on the profits, use some of the profit to pay into a pension plan up to the £60,000 annual limit. Yes, the money is then tied up in a pension, and that has downsides, such as not being able to access your pension until the age of 57 from 2028, but on balance, it is tax-efficient for both the company and yourself with tax relief up to 45% on your contributions.

“Remember also that Inheritance Tax (IHT) is going to be due on pensions from 2027, however and as the speakers have said, you still need some certainty in an uncertain world and a pension will be part of that.”

Chris continued:

“…I hear many people, even in businesses, talking about “I’ve got a house, that’s going to be my pension, I’ll sell the house and that will be my pension.” – Yes, that’s a possibility, but surely the better way of doing it is putting money into something like an exchange-traded fund that Paul was talking about earlier.”

“…It will grow and as it grows you will end up finding with compound growth, that will become a hugely valuable asset to you in time by the time of your retirement, provided you don’t have to pay IHT on it. It’s early days yet as to what the strategy will be post 2027 to minimise IHT on your pension fund”

“OK, let’s move on to how best to exit a business”

“… If you chose a company structure as a starting point, you will have shares and this will mean that if and when you come to sell them, this will crystallise a capital gain, whether you sell to a third-party buyer, an employee ownership trust or another director, etc.

Capital gains tax rates are at the rate of 24% at the moment. They’ve gone up from 20% and if you qualify for what used to be known as entrepreneurs relief, now business asset disposal relief, essentially for an unquoted company, the shares will qualify for a reduced tax rate that is now 14%, but only for this year; it will be going up to 18% next year, but nonetheless still better than 24%.”

So having shares is the best thing where an exit is concerned.” 

Susanne: What other things can you do?

Chris:

“Well, liquidating the company is another option, especially if you built up value in the company. However, this is also a capital gains taxable event. Other than that, extracting money as you’re going along in a tax efficient way has largely been legislated out of existence in so much as the rate of tax on dividend income has been ramped up over the years.

How do I get my money out?

You can get it out, either as a salary or bonus. However, this is going to be taxed at an effective rate of 50-odd percent % when you take into account the kind of interplay between corporation tax relief and what you’re going to be taking out.

Similarly with a dividend, it is the same thing, it’s around about 55% as the effective rate.

A better solution would be to take out money as either interest, for example, if you loan money into the company, then you take the interest out. Yes, the interest on that loan is still taxed at 45%, but it’s obviously better than 54%.

Or consider rent, so if you allow your company to use premises that you have acquired, you can charge a rent to the company, that is again more tax efficient than taking salary out or taking other things out.”

Susanne:

“So now we’re coming to one topic, I know which is very important to all of you who are CEOs and who’ve got employees and team members below you. Which is:

Q:  How can the company reward its employees and founders in the most tax-efficient way in terms of bonuses, employee benefits, options, shares?

I wanted to ask Helena first in terms of how do you do it in practice, because you’ve got a large team. We just talked about your great tech developers.

Q: How do you keep your team motivated and incentivised?”

Helena Wardle:

“…I pay them well, it’s the first important point. We pay close or as close to market rates as we can. The one thing I can share is we’ve been running for 4 years and we’ve only just issued the share option.”

“Before I started the business, I pretty much interviewed as many founders as I could find who would give me time and I asked them to tell me all the mistakes they made and share options and giving them too early, giving too many was one that all of them told me.”

“I have not been stingy, I’ve just been very careful. During your first 3, 4, 5 years of your business, you’re very likely to fail. I’m sorry to say that, but that’s true because statistics show that. Startups are not worth anything once they’ve got going, until they get revenue. So do not give share options out. In my opinion, and in my experience, until you have revenue or you reach revenue, you’re giving something away, options, that are almost worth nothing.”

“… That is what I’ve learned, and that’s what I think is really important that I learned from other founders. So, you can do share options, and if you incentivise people early, do that because they’re going to be in your business until you exit. That is actually rare to find, so unless it’s a co-founder, that’s not actually that easy.”

“…Even employee number one, I wouldn’t throw shares at them because they don’t value it. They value it once they can see the business will have a route to succeeding. That’s what I’ve learned from my team and you get their buy-in. So, we talked through share options and how they work, what it actually means to the team before we issued it and to really understand if they value it. Even now I would say half my team do, the rest don’t. This has been the first lesson I’ve learned; pay people well because that’s what they’re there for.”

“But also, the other thing I think is really interesting is that you need to give people opportunities to progress. We are working with really cutting edge tech. Every single person in our business is AI first, which means they use AI to enhance their jobs. They are learning more from our business than any other job they would have. That is enormously valuable to people.”

“…So understand what value you’re adding to your employees. It’s not always mandatory. Are you giving them a learning opportunity they will not find anywhere else? And if you are, there’s big value to it. And people will take salary cuts for that, like two senior leaders have. You know, they may accept an under-market salary rate because they are learning more than they will ever learn in any other business. So that’s really valuable.”

“…The other thing is normal employee benefits, like the stuff we have talked about, is not expensive. We have got really strong benefits. We have sick pay and income protection which costs little but is very attractive. We have death in service, which is really rare for a startup at our stage and again it doesn’t cost us the earth, it’s almost no money. 

“We also make sure that we talk about employee benefits and really explain it to the team, and we issue valuations for the share options, because if you can’t put a value to them, what are they actually having? People don’t buy into it if they can’t see what’s in it for them, and you have to bring that to life.

That’s definitely my experience and also that of more than ten founders I spoke to. Be very careful with issuing options too quickly.”

Susanne:

“…Fantastic advice, Helena. Thank you. And maybe if I can ask Chris now. So let’s assume you know you want to launch, it’s at the right time of the startup.

Q: How do you do it? Actually, how do you launch options and share options in the most tax efficient way?”

Chris Blundell

“…I think it is about communicating with your employees. It does not have a magic result with your employees if you give them shares or share options to motivate and incentivise them. They need to understand what they are and what they do and how their efforts can influence their value. If they do understand what they have and you have regular communications with them about their shares’ value, they will be motivated by them and fully understand how their efforts influence the value of their shares over the longer term. So, they are then a win-win for growth and loyalty”

“By giving employees a real stake in the company’s success, share schemes align their financial interests directly with the shareholders’ value, fostering a vital sense of ownership and commitment”

“But what about the tax advantages?”

The primary appeal lies in the generous tax reliefs offered by HMRC-approved schemes, effectively turning future gains into a powerful incentive. This is achieved by allowing employees to avoid or defer high-rate Income Tax and National Insurance Contributions (NICs) on the value of the shares, instead subjecting the profit to the lower Capital Gains Tax (CGT) rate which will be 18% from 2026/27 in an EMI scheme and 24% in the other HMRC approved option schemes. There’ll potentially be no tax at all if you adopt a Share Incentive Plan.

What are the different types of schemes? 

• EMI Schemes (Enterprise Management Incentives): The most generous option, designed for smaller, high-growth companies with less than 250 employees and less than £30m of assets on their balance sheet. Employees typically pay no Income Tax or NICs on the grant or exercise of the options. Crucially, the final sale can often qualify for Business Asset Disposal Relief (BADR), taxing the gain at just 18% (on qualifying amounts from 2026/27). This is the gold standard for attracting and retaining key individuals in high-growth firms.
• CSOPs (Company Share Option Plans): A flexible alternative, often used by companies that are too large to qualify for EMI. Employees pay no Income Tax or NICs if the option is exercised at least three years after grant. The eventual gain is subject to CGT.
• SIPs (Share Incentive Plans): Designed for broad employee participation. These are highly tax-efficient: shares (Free, Partnership, or Matching) are generally free of Income Tax and NICs on award, and employees pay no CGT on sale if the shares have been held in the plan for at least five years. This is the top choice for creating an all-employee ownership culture.

Susanne asked Chris how do these schemes help motivation and retention?

“Beyond tax, the structured nature of these schemes makes them excellent retention tools:

1. Retention: Options (EMI/CSOP) often include a vesting period (e.g., three to five years). Employees must remain with the company to receive the full benefit, acting as a powerful set of 'golden handcuffs' for key staff.
2. Motivation: Employees who are also shareholders are more likely to be engaged, productive, and focused on long-term performance, as they know their hard work directly increases the value of their own shares.
3. Recruitment: Offering equity, especially the highly regarded EMI options, can be a crucial competitive advantage for attracting top talent, particularly when cash  compensation might be limited.

“By choosing the right scheme—discretionary options for key individuals (EMI, CSOP) or an all-employee plan for broad engagement (SIP)—a UK company can strategically invest in its people and its future growth.”