Company Savings Account

[Scrag Meister]

Santander pay a whopping 1% if you have > £5K and don't make withdrawals.

Pay your corp tax early - HMRC give you interest if you do.

I received my early CT payment refund check yesterday, £7.87 Yeyyyyyy!!!

[northernladuk]

I received my early CT payment refund check yesterday, £7.87 Yeyyyyyy!!!

before tax

[TheCyclingProgrammer]

before tax

[Lumiere]

Aldermore have a 1.1% easy access savings account.

This, or Saffron BS.

[SueEllen]

I received my early CT payment refund check yesterday, £7.87 Yeyyyyyy!!!

Don't spend it all at once.

[Bones]

Whilst that's true, if you've built up enough retained profit in YourCo, over and above what you need for a war chest (which you ideally want to keep readily available), then there's no reason you can't put a chunk aside from your existing retained profit for your future CT bill, based on a reasonable estimate of what it will be.

I dont quite understand why you would want the have a war chest retained within the company, is there some tax advantage?

I cant really see any point in retaining money in the business (other than tax commitments) gaining no interest when you could take it out and get maybe 3%. Its going to cost you the CT anyway??

As for estimating your end of year CT and then locking it away in advance sounds like you are just tying up money into a low interest business account?

The low interest gained from the 20% would never outweigh the high interest gained on the 80%!

Aldermore have a 1.1% easy access savings account.

Oops I missed that, it looks like a very good option as an easy access business account that pays 1.1% rather than nothing. I can see my HSBC account being £1 from now on.

[TheCyclingProgrammer]

I dont quite understand why you would want the have a war chest retained within the company, is there some tax advantage?

Of course there is. The advantage is, you don't have to pay any more tax than you need to buy taking it out of the company. If you can live on the maximum income up to the higher rate, then there's little point withdrawing more and paying higher rate tax (effectively 25%) unless you need it for a specific reason.

The whole point of leaving it in the business is so you can continue to draw your regular dividends up to the higher rate threshold when you've got no work.

That doesn't mean you need years worth of profit built up...retain what you need to be comfortable and maybe put the rest in a pension.

I cant really see any point in retaining money in the business (other than tax commitments) gaining no interest when you could take it out and get maybe 3%. Its going to cost you the CT anyway??

Yes of course you're going to pay CT but why add a 25% income tax bill on top too?

As for estimating your end of year CT and then locking it away in advance sounds like you are just tying up money into a low interest business account?

I thought that's exactly what you wanted to do? Put away a lump sum in a business savings account for as long as possible.

[Bones]

Of course there is. The advantage is, you don't have to pay any more tax than you need to buy taking it out of the company. If you can live on the maximum income up to the higher rate, then there's little point withdrawing more and paying higher rate tax (effectively 25%) unless you need it for a specific reason.

The whole point of leaving it in the business is so you can continue to draw your regular dividends up to the higher rate threshold when you've got no work.

That doesn't mean you need years worth of profit built up...retain what you need to be comfortable and maybe put the rest in a pension.

OK I am now googling "dividends up to the higher rate threshold"

It would seem that you need an extended period of no work in a tax year to avoid higher rate tax!?

Yes of course you're going to pay CT but why add a 25% income tax bill on top too?

So I cant take more than £32,010 in a tax year without attracting more tax.....I can see a problem here!

I thought that's exactly what you wanted to do? Put away a lump sum in a business savings account for as long as possible.

Not at all, I dont have a lump sum, yet. It will be building up over this tax year so I cant invest what hasnt been earned yet. What I wanted was a savings account that I can keep adding money to over the year and get a monthly interest on the balance.

[northernladuk]

OK I am now googling "dividends up to the higher rate threshold"

It would seem that you need an extended period of no work in a tax year to avoid higher rate tax!?

Eh? No you don't you just don't take it all out and build a warchest up. Enough for 6 - 12 months is ideal. If you have an accident or just can't find work for a long period you just continue to divi as normal.

IMO Your warchest should be number 1 priority. We have plenty of posters on here that have had extended periods off and have got very twitchy about where the next money is coming from which can't be a nice place to be. Live a fairly basic life until you have your warchest behind you and then you can think about spending more on women and booze.

[TheCyclingProgrammer]

OK I am now googling "dividends up to the higher rate threshold"

It would seem that you need an extended period of no work in a tax year to avoid higher rate tax!?

So I cant take more than £32,010 in a tax year without attracting more tax.....I can see a problem here!

YourCo can earn as much as it wants. It will pay 20% CT regardless.

It's £32010 plus your personal allowance although most of that will be used up by your basic salary.

All told, you should be able to withdraw about £3100 a month net without incurring any income tax.

Not at all, I dont have a lump sum, yet. It will be building up over this tax year so I cant invest what hasnt been earned yet. What I wanted was a savings account that I can keep adding money to over the year and get a monthly interest on the balance.

I was under the impression you already had significant retained profit. If not your first priority, as NLUK says, would be to build up your warchest.