Company retained profit in the long term

[northernladuk]

What business accounts are giving 3% interest though?

And which ISA's give 5%?

You might be able to find other ways of investing business funds to get higher rates of return but then you greatly increase the risk of HMRC deeming your company to be an investment company don't you?

^ This.

[JoJoGabor]

That's why I caveated with saying the calculations were done a few years ago. I am currently getting 1.9% in an ING Business saver, but that will drop shortly. But remember that we are basing these calculations over a 12 year period, no doubt interest rates will rise over that time, so a 3% average is not unreasonable

[JoJoGabor]

And which ISA's give 5%?

.

As I said above you choose your investment. I get a higher than 5% return in my Stocks and Shares ISA portfolio most years, all wrapped up in an ISA.

[ITPRO2]

Still wrong. You can do this from time to time at the end of the contract. Quite possible to say you don't want to contract and shut it down. A month later you get a gig and give it another go.

Not a tactic to use too often but not out of the question to do a few times over a 30 year contracting period.

You should also base your numbers on around a 45 weeks working year and include a couple of months bench time ever few years.

Also remember we stay under the limit so we don't pay tax on money we don't need at the moment. It isn't a hard stop. Why should you live a lifestyle at 40k a year when you have 100's of K sat in the bank. You work to live so leaving that amount of money in the account while you life a pretty frugal life is also silly. I would rather pay the excess tax and be happy than miss out on living just to keep some money in the LTD.

Suggesting to close a company down, then open a new one within the space of just a month isn't the best advice I've ever seen written on this board. I think you'd have a hard time explaining that one to HMRC without it looking like a blatant tax evasion measure.

If you took a real break (going perie, 6 months holiday, etc) and you had a "legitimate" story to backup the closure then that should be OK.

[northernladuk]

Suggesting to close a company down, then open a new one within the space of just a month isn't the best advice I've ever seen written on this board. I think you'd have a hard time explaining that one to HMRC without it looking like a blatant tax evasion measure.

If you took a real break (going perie, 6 months holiday, etc) and you had a "legitimate" story to backup the closure then that should be OK.

To a certain extent yes but then a bit of no. Doesn't matter what it looks like to them it's up to them to prove you fully intend to contract again which they cannot. Lots of reasons you can give, particularly if the last gig was off your skillset you could have fully intended to go perm to get experience in your skillset but out of the blue another contract came along you couldn't refuse. It happens and they can't prove it. As you say much better to use it with a legitimate reason and not do it every two years etc. Just keep an eye out for that reason and be ready.


A method to use sparingly and intelligently though yes.

[ITPRO2]

To a certain extent yes but then a bit of no. Doesn't matter what it looks like to them it's up to them to prove you fully intend to contract again which they cannot. Lots of reasons you can give, particularly if the last gig was off your skillset you could have fully intended to go perm to get experience in your skillset but out of the blue another contract came along you couldn't refuse. It happens and they can't prove it. As you say much better to use it with a legitimate reason and not do it every two years etc. Just keep an eye out for that reason and be ready.


A method to use sparingly and intelligently though yes.

My view is that is would be against the spirit of the law. From HMRC:

Our approach to tax compliance

Not paying the right amount of tax places an unfair burden on the honest majority of taxpayers. That is why the Government is investing £917 million between 2010 and 2015 to increase tax compliance. This includes illegal tax evasion and those who seek to avoid tax by operating within the letter - but not the spirit - of the law. This briefing explains our approach to tackling both evasion and avoidance, so we can collect the right amount of tax.

[northernladuk]

My view is that is would be against the spirit of the law. From HMRC:

Our approach to tax compliance

Not paying the right amount of tax places an unfair burden on the honest majority of taxpayers. That is why the Government is investing £917 million between 2010 and 2015 to increase tax compliance. This includes illegal tax evasion and those who seek to avoid tax by operating within the letter - but not the spirit - of the law. This briefing explains our approach to tackling both evasion and avoidance, so we can collect the right amount of tax.

I bow to your honesty and integrity sir. You going to give up your LTD and go umbrella now then?

[kingcook]

This includes illegal tax evasion and those who seek to avoid tax by operating within the letter - but not the spirit - of the law

Typical HMRC 5h1t.

So now people who are paying the right amount of taxes by law are acting illegally.

[No2politics]

OK here it is, I assumed 5% return in an ISA protected private investment and 3% in company account (This was three years ago)

Amount 1000.00
Interest Rate 0.05 0.03
Take as dividend Leave in business account
Net 750.00 1000.00
End of Year 1 787.50 1024.00
End of Year 2 826.88 1048.58
End of Year 3 868.22 1073.74
End of Year 4 911.63 1099.51
End of Year 5 957.21 1125.90
End of Year 6 1005.07 1152.92
End of Year 7 1055.33 1180.59
End of Year 8 1108.09 1208.93
End of Year 9 1163.50 1237.94
End of Year 10 1221.67 1267.65
End of Year 11 1282.75 1298.07
End of Year 12 1346.89 1329.23
End of Year 13 1414.24 1361.13
End of Year 14 1484.95 1393.80
End of Year 15 1559.20 1427.25
End of Year 16 1637.16 1461.50
End of Year 17 1719.01 1496.58
End of Year 18 1804.96 1532.50
End of Year 19 1895.21 1569.28
End of Year 20 1989.97 1606.94
End of Year 21 2089.47 1645.50
End of Year 22 2193.95 1685.00
End of Year 23 2303.64 1725.44
End of Year 24 2418.82 1766.85
End of Year 25 2539.77 1809.25

Great idea. Not sure why I haven't thought of doing this calc myself.

Would be interested in developing this spreadsheet further to take into account taking a pension at 55. Because the closer you are to 55, the better whacking it in that looks. Perhaps pm me with your email and will look at knocking one up.

[ITPRO2]

I bow to your honesty and integrity sir. You going to give up your LTD and go umbrella now then?

Thanks, I'll accept that as your way of saying I'm right and you're wrong.

Thanks again