Can you keep money in a company?

[SoupDragon]

Say you were working all of one financial year but not the next... is there a way to keep money in the company sort of like a trust fund - and only pay tax if you take it out.

For example, if your ltd company uses some of its money to buy shares, how is this taxed?

[malvolio]

Money left over is called "profit". You pay corporation tax on it annually. Not paying CT on it is illegal and you go to jail, but there's nothing to stop you leaving it in the company - else how do you get through periods of no work?

If you buy shares and make money, you can add any resultant income to your gross profits. However, Hector might then decide you are an investment company and tax you all your profits at a much higher rate.

I think you need to do some further reading...

[zathras]

Say you were working all of one financial year but not the next... is there a way to keep money in the company sort of like a trust fund - and only pay tax if you take it out.

For example, if your ltd company uses some of its money to buy shares, how is this taxed?

Yes you can keep it in the company, you will pay CT on it however.

If it is withdrawn the next year IIRC there is no tax to pay unless the total income of the drawee exceeds the upper rate tax level.

[Hiram King Of Tyre]

So what happens if at the end of the year, there is a surpless. You pay 20% CT on it. Can you then only pay is as a dividend and not salary (No CT on salary as it isn't profit)

[Bluebird]

So what happens if at the end of the year, there is a surpless. You pay 20% CT on it. Can you then only pay is as a dividend and not salary (No CT on salary as it isn't profit)

you can pay as divi or salary - salary will attract Income Tax & NI , dividend will only attract additional tax if you cross the 38k presonal threshold

[SoupDragon]

I thought perhaps shares would represent assest rather than profits...?

[Bluebird]

It does, but you would then become an investment vechicle and gordo taxes them differently...

[VectraMan]

So what happens if at the end of the year, there is a surpless. You pay 20% CT on it. Can you then only pay is as a dividend and not salary (No CT on salary as it isn't profit)

If you have a surplus then you would have to pay CT on whatever the profit was for that year. You can use that money to pay yourself a salary (or other costs) for the next year, which would mean you'd make a loss on that second year and have no CT to pay (presumably you don't get it back?).

[Hiram King Of Tyre]

but if you use it to pay salary, you have already paid CT on it. You don't pay CT on salary. Does that mean youve lost 20%?

[Sockpuppet]

but if you use it to pay salary, you have already paid CT on it. You don't pay CT on salary. Does that mean youve lost 20%?

Yes, yes it does.

or...

You could think a bit more and find the concept of "financial year" more appealing. What you ex MSC/Umbrella chaps need to fathom is that profit != cash in bank or cash flow.