Can I use my business' money to invest in stocks or property instead of paying myself

[blackeye]

I do agree I should invest in a pension, although I'm <30 and I do want to take advantage of the passive income early.

I don't want to pay myself over 100k, because of the 60% effective tax from 100k to 120k, Tax system flaws leave professionals paying 60 per cent - Telegraph

I don't understand how that is relevant to a low salary, high dividend payment structure?

I'm around your age and because I'm saving to buy a house, all of my retained earnings are going into dividends. I invest 80% of my personal disposable income into a portfolio of funds, some of which are quite adventurous (think Jupiter India!). The rest goes into easy access Peer to Peer lending.

My overall tax rate now is circa 50% because I'm only paying £750 into my pension and my other expenses are low.

If I was older with a house, I would be maxing out my pension and thus the overall tax rate will be lower.
If I was nearing retirement I would retain money in my LTD to draw slowly and tax efficiently as I already have a house paid off and a sizeable pension.

It's a complex topic and your personal situation will dictate what you should do. There is no point investing retained earnings from your LTD without assessing your personal situation.

[blackeye]

The disadvantage of personal investments is that I pay 20% corporation tax, then dividend tax, then I invest and I pay dividend tax on the profits on that. If investing via the Limited company can save me some tax, then why not.

Just another note, you should always buy accumulation funds, not income when you're young. If you've invested within an ISA wrapper you won't be tax in the capital gains.

I think you should see a financial advisor..

[ujjain]

Thanks a lot. I thought contractors would lose their personal allowance too after paying themselves too much dividends? I could be wrong though.

I'm already investing in accumulation funds, although income of my bonds is paid out inside of the ISA available for reinvestment, so I think that shouldn't matter.

But I'll keep doing more research and maybe find a financial advisor yeah.

[Contreras]

I'm already investing in accumulation funds, although income of my bonds is paid out inside of the ISA available for reinvestment, so I think that shouldn't matter.

Open a SIPP and the company pays directly into it. Then, broadly speaking, whatever you are doing inside the ISA can be done inside the SIPP too. The SIPP can be more tax efficient *but* your investment is locked away and potentially subject to rule changes (money grab) so IMHO consider using up the ISA allowance first.

An IFA might help with investment strategy and choice of SIPP provider. Though I would much rather trust an accountant for the tax technicalities, company and personal.

[giuseppev]

hi ujjain,

any luck with investing your ltd cash?

Thanks

I have saved around £50k on my business bank account. Can I use my business' money to invest in stocks or property instead of paying myself dividends?