Business Bank account funds

[Tasslehoff]

I have a considerable amount of cash (well for me) in my Business bank account (20k+). I am not due to pay my taxes for a while as this is my first year of incorporation.

I am just wondering what most people do. Do they leave it sitting where it is, or is there anything I can do for it to do some “work” for me. I use FreeAgent for my accounts so I need to consider how it’s reflected in that if I move it.

Yes I have an accountant , I just thought I would get an wider view.

[SimonMac]

I have a considerable amount of cash (well for me) in my Business bank account (20k+). I am not due to pay my taxes for a while as this is my first year of incorporation.

I am just wondering what most people do. Do they leave it sitting where it is, or is there anything I can do for it to do some “work” for me. I use FreeAgent for my accounts so I need to consider how it’s reflected in that if I move it.

Yes I have an accountant , I just thought I would get an wider view.

Same boat, I leave it where it is earning me nothing, but knowing I have 6 months or more warchest for the lean times.

If you still have money at the end of the corp year with all liabilities taken into consideration you can pull it off and use ISA's etc, do you have provision for a pension?

[Dan@OrangeGenie]

I have a considerable amount of cash (well for me) in my Business bank account (20k+). I am not due to pay my taxes for a while as this is my first year of incorporation.

I am just wondering what most people do. Do they leave it sitting where it is, or is there anything I can do for it to do some “work” for me. I use FreeAgent for my accounts so I need to consider how it’s reflected in that if I move it.

Yes I have an accountant , I just thought I would get an wider view.

HIBA is about the best option, remember the money belongs to the company. If you want to invest it personally, you'll have to pay it to yourself first and allow for the relevant personal taxes.

Or if you're planning on taking a break from contracting in the future, consider the benefits of closing the company?

[Louisa@InTouch]

In the meantime if you are waiting to pay tax bills with these funds, you could put them into a short to mid-term fixed interest bond. You could have this mature just before any taxes are due.

But you will need to make sure the bond is in the business name.

Also, if you have surplus profits and don't need the 'cash' for dividends. You might want to consider some employer pension contributions. This would help reduce your corporation bill and you will personally have the funds when you retire.

[northernladuk]

Work out what is yours and what is the tax mans. Leave the tax mans stuff well alone. If you have profit left over consider diving yourself up to your yearly limit as soon as possible rather than trickle it out monthly. I pay my full amount in April and stick it in somewhere it's going to be useful.

I would guess you only have a couple of K actual spare cash. That's your warchest and really won't be worth re-investing (IMO). You'll be taxed on the little money it makes plus complicating matters.
20k is only two months billing so IMO just leave it.

[Tasslehoff]

Work out what is yours and what is the tax mans. Leave the tax mans stuff well alone. If you have profit left over consider diving yourself up to your yearly limit as soon as possible rather than trickle it out monthly. I pay my full amount in April and stick it in somewhere it's going to be useful.

I would guess you only have a couple of K actual spare cash. That's your warchest and really won't be worth re-investing (IMO). You'll be taxed on the little money it makes plus complicating matters.
20k is only two months billing so IMO just leave it.

Sorry should have been clearer.

It's all set aside for Corp Tax. My first accounts are not due for a while as I say, and it seems crazy for it sitting there doing nothing but as you say it may not be worth the hassle.

[northernladuk]

Ah OK. Get your accountant to do your taxes as soon as and pay it in for a interest rebate maybe?

[Forbes Young]

Spare Funds

I have a considerable amount of cash (well for me) in my Business bank account (20k+). I am not due to pay my taxes for a while as this is my first year of incorporation.

I am just wondering what most people do. Do they leave it sitting where it is, or is there anything I can do for it to do some “work” for me. I use FreeAgent for my accounts so I need to consider how it’s reflected in that if I move it.

Yes I have an accountant , I just thought I would get an wider view.

First thing to clarify is how much of this bank balance should be set aside to pay the company's liabilities such as corporation tax, VAT and PAYE/NI. Your accountant should be able to tell you about this and help clarify what exactly is "spare".

Once this is established my advice would be to approach your bank to see if they have any deposit account which pays out a bit of interest (none pay out high interest these days!). If so, you can use this deposit account to earn a bit of interest until the liabilities are due to be paid.

If there is still a significant amount of funds left my advice would be to see an Independent Financial Adviser (IFA) who should be able to provide you with options both for pension schemes as well as appropriate investment schemes. Many of our clients find it more tax efficient to set up a company pension scheme, as opposed to a personal pension scheme – in almost every case it is better to do it this way if you are a higher rate tax payer -ie to make contributions from your own limited company into a pension scheme as opposed to you making them personally. Also when paying personally into a pension fund you cant exceed your salary total for the tax year whereas you can with a company scheme which offers more flexibility.

[TheFaQQer]

I have the following:

1) Aldermore fixed rate savings account - locked until next summer. This contains my estimate of what the corporation tax bill will be for this year. Pays 1.76%

2) Aldermore savings account - instant access account warchest-type fund - pays 1.09%

3) Cambridge and Counties Bank - 30 days notice account more warchesty funds - pays 1.5%

My Santander business account also has a reserve account which pays next to nothing, so I only have about £40 in there at the moment.

I regularly drip-feed from the Santander current account into Aldermore, but now it will probably go into CACB instead until I get close to the £85k FSCS limit.

[cherhill]

Same boat, I leave it where it is earning me nothing, but knowing I have 6 months or more warchest for the lean times.

If you still have money at the end of the corp year with all liabilities taken into consideration you can pull it off and use ISA's etc, do you have provision for a pension?

hee hee