Making your warchest work for you

[acnm]

I'm building a healthy warchest and tend to not make any dividend withdraws unless I need to, but would like that warchest to do more than just sit there.

Any suggestions? For example is it possible to take an interest free directors loan and throw the cash into a high interest account or ISA or even a high interest business account (do they exist?)

[TheFaQQer]

If you are using a directors loan, then if it goes over £10k at any stage of the year then you will need to pay interest on the loan or incur a benefit in kind charge. You also need to repay it within nine months of the year end, or pay a lump sum to HMRC on deposit. So that limits what you could do with it personally during that time.

The best you are going to get in a business account is somewhere in the region of 1.5% if you want 30 day access - you can get better rates by locking the money away for longer, but if you need it then you probably lose the benefit of higher interest.

You could start putting the money into a pension fund - employer contributions are an expense which then means you don't pay corporation tax on that money, so effectively your fund would need to lose 20% to break even.

There are a number of threads around here discussing this - including one from last week or so.

[northernladuk]

I'd suggest you try a search for what to do with the war chest. It does tend to get asked weekly. Use the search method mentioned in the FAQ section though.

[Forbes Young]

I'm building a healthy warchest and tend to not make any dividend withdraws unless I need to, but would like that warchest to do more than just sit there.

Any suggestions? For example is it possible to take an interest free directors loan and throw the cash into a high interest account or ISA or even a high interest business account (do they exist?)

Some good points have already been made above but I would always stress the importance of discussing your overall position with your IFA (ie this will include all assets you own including your ltd company and how you are set up for pensions). A good IFA will come up with investment solutions to suit your particular circumstances.

[Dan@OrangeGenie]

I'm building a healthy warchest and tend to not make any dividend withdraws unless I need to, but would like that warchest to do more than just sit there.

Any suggestions? For example is it possible to take an interest free directors loan and throw the cash into a high interest account or ISA or even a high interest business account (do they exist?)

I strongly recommend speaking to an IFA. They'll be able to give you some sound advice and help your money to work harder.

[Forbes Young]

I strongly recommend speaking to an IFA. They'll be able to give you some sound advice and help your money to work harder.

Nice to know you agree Daniel!

[hydraulicwave]

How about taking out a portion to play on the stock market. Some excellent growth can be realised very quickly.

[stek]

How about taking out a portion to play on the stock market. Some excellent growth can be realised very quickly.

Then u become an investment business don't u? Different tax treatment...

[Forbes Young]

How about taking out a portion to play on the stock market. Some excellent growth can be realised very quickly.

"Can" being the operative word. Investments can also plummet in value, losing you plenty of hard earned cash. In my opinion, you should take the advice of investment experts when investing your funds (including buying/selling stocks and shares).

[Chris at CrunchAccounting]

A few points

Just a few things I would like to add:

1) Make sure you are issuing dividends to take you up to the basic rate band (your accountant can ensure this - you don't want to waste your allowances).

2) Be aware of becoming an investment company (especially if you stop trading with large investments).

3) Take sound financial advice from a IFA.

4) Ensure you tell your accountant about any investment/pension contributions in advance so they can give you good tax advice.