Coming from Freeagent, as I understand it the Carried Forward is the amount that's immediately available to be paid out either as a Dividend or Salary. I've got a fair old amount stashed away in this box. I'm acutely aware that inflation is doing me no favours by keeping this money static. What should I do about it? Keep some or smash the piggy bank and immediately pop it into a savings account? Obviously the assumption here is I'm in BR and don't slip outside it.
- Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
- Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!
Carried Forward / Distributed amount. Keep or take out?
Collapse
X
-
-
You need to think at your business worst case. What if you are out of work for 6+ months and that money is all tied up? Is your warchest in the company or in your personal savings? That will give you an idea of what chunk needs keeping in the business for a rainy day and not for investing it or moving around. That might mean you don't have much of a decision to make on the rest or your 'chunk' could still be so big you need to look at using it better.
Get the bottom line sorted and find out what is actually spare and then start thinking about what to do with it.
Using the google search method to search for what to do with spare cash. Many many threads about it and from what I remember there aren't many investing opportunities. Aldermore's business saving accounts are going up but not from much, i very much doubt you want to touch shares and bitcoin is far too dangerous so leaving it might be the best option at the moment.
Just be careful of the total 'chunk' as well. If it's over 75k you are best moving it around whatever the above brings.'CUK forum personality of 2011 - Winner - Yes really!!!! -
yes. That's yours to take (Carried forward / distributable)
I would take it all up to the higher rate. And top up your pension.
You could potentially take more and go into the higher rate...
I have considered doing that as if I recall correctly 7% inflation halves your money in 10 years. So is it worth paying 32.5% tax now and stashing it into an investment rather than have it devaluing.
But inflation isn't likely to be that high for long (or is it?)
and are you realistically going to keep the money in the company for 10 years anyway?
What's your plans for the next 2-3 years? As that will best determine the correct course.
If you end up with an inside gig you could be looking at 37.5% tax on your distribution. So maybe paying 32.5% now is worthwhile for that reason alone.
Only you can answer.See You Next TuesdayComment
-
No idea what "a fair old amount" is...but worth stressing blindly sticking to the basic rate band isn't always the optimal route.
Sure, if you make profits post CT of (say) £70k one year, and aren't confident the following year will be as good, then restricting dividends to basic rate band makes sense.
If you're consistently making post CT profits of £100k+, no expectation to stop soon, then whilst the accountant in me admires the frugality, treat yourself! Perhaps forget the basic rate band as your mental limit and jump to £100k total personal income (ie bit before you start losing your personal allowance). Sure, your personal tax bill will jump from ~£3k to ~£20k. That is a big jump. But your post tax income will jump from ~£47k to ~£80k. Also a big jump.
Pension is another option for excess cash. If you're not already putting £40k/year into that, worth considering.
Finally if you think you might shut up shop soon then can make sense to stockpile in anticipation of an MVL.
If you leave it in the company, there's plenty of low risk but also low interest savings accounts. Those are fine. Be a bit cautious about anything more quirky than that (eg investment funds, crypto, BTL property)...at least run it by your accountant first.Comment
-
Quality post from Maslins as usual. Some extra points for maybe newer contractors.
Originally posted by Maslins View PostNo idea what "a fair old amount" is...but worth stressing blindly sticking to the basic rate band isn't always the optimal route.
Sure, if you make profits post CT of (say) £70k one year, and aren't confident the following year will be as good, then restricting dividends to basic rate band makes sense.
If you're consistently making post CT profits of £100k+, no expectation to stop soon,
Big area of risk in contract and it's not as clear as it is before. Just a warning point.
If you leave it in the company, there's plenty of low risk but also low interest savings accounts. Those are fine. Be a bit cautious about anything more quirky than that (eg investment funds, crypto, BTL property)...at least run it by your accountant first.'CUK forum personality of 2011 - Winner - Yes really!!!!Comment
- Home
- News & Features
- First Timers
- IR35 / S660 / BN66
- Employee Benefit Trusts
- Agency Workers Regulations
- MSC Legislation
- Limited Companies
- Dividends
- Umbrella Company
- VAT / Flat Rate VAT
- Job News & Guides
- Money News & Guides
- Guide to Contracts
- Successful Contracting
- Contracting Overseas
- Contractor Calculators
- MVL
- Contractor Expenses
Advertisers
Contractor Services
CUK News
- Streamline Your Retirement with iSIPP: A Solution for Contractor Pensions Sep 1 09:13
- Making the most of pension lump sums: overview for contractors Sep 1 08:36
- Umbrella company tribunal cases are opening up; are your wages subject to unlawful deductions, too? Aug 31 08:38
- Contractors, relabelling 'labour' as 'services' to appear 'fully contracted out' won't dupe IR35 inspectors Aug 31 08:30
- How often does HMRC check tax returns? Aug 30 08:27
- Work-life balance as an IT contractor: 5 top tips from a tech recruiter Aug 30 08:20
- Autumn Statement 2023 tipped to prioritise mental health, in a boost for UK workplaces Aug 29 08:33
- Final reminder for contractors to respond to the umbrella consultation (closing today) Aug 29 08:09
- Top 5 most in demand cyber security contract roles Aug 25 08:38
- Changes to the right to request flexible working are incoming, but how will contractors be affected? Aug 24 08:25
Comment