Question about taking money out of a business

[northernladuk]

Being built up on the company's business bank account over the course of this year. Well insured against accident/sickness so only need to legislate for lost income due to lack of a contract and tbh that's highly unlikely given our market and skills shortage atm however are getting quite a few thousand together to leave in business from year to year just incase of leaner times.

The whole idea of a warchest is to protect you from the 'highly unlikely' cause if it does happens you could lose everything... as other posters on here have in the past. 4-6 months would be more apt.. but it's your level of risk so if you are happy with that.

[psychocandy]

I had a similar thing a few months ago.

Basically, my account provides me a P&L every month so I know how much profit is. If I then so desire I can take a dividend safe in the knowledge that VAT, CT is all still left in the account.

BUT, this is assuming you're going to pay salary for rest of year even if you're not in contract.

What happens if 6 months in your out of contract and you've taken all the profit out already? No more money to pay salary for the rest of the year...

Almost happened to me. At the time, I had a think about it and thought, OK, if it happens I might stop paying salary anyway and have a dig at claiming JSA (but thats another argument and you deffo cant if you're still paying salary).

But of course not paying the £7488 (or whatever) somewhat wastes a bit of your tax allowance for the year.

In the end, accountant said one idea would be to stop salary, claim JSA, then, if in contract before end of financial year, pay more to catch up to £7488 total for the year.

But it has made me think that you do need to keep at least a bit of the profits in the company to allow some sort of flexibility.

And dont agree with NLUK that warchest has to be kept in company. Nope - take it all out and stick in your own savings account as long as you can do so and remain under 40% bracket. If you can't then theres an argument for leaving it there.