How soon to take all profits as dividends

[yetanotherbob]

What's the best approach to follow:
To withdraw all the profits as dividends as soon as one can or to keep part of the warchest in the company accounts...?

[northernladuk]

What's the best approach to follow:
To withdraw all the profits as dividends as soon as one can or to keep part of the warchest in the company accounts...?

Surely this is YOUR choice depending on YOUR situation. We cannot help with this. It isn't even in the newbie guides so I can't point you to some reading.

You know what a warchest is for so assess your own need for it and level and then act accordingly.

[Clare@InTouch]

It also depends on how much tax you want to pay. You'll never get away from CT, but there are longer term strategies that could reduce your personal tax.

Withdraw enough to take you up to higher rates each year, meaning you'll pay no personal tax. The money that gets retained in the company can then either support you when you go off travelling for a year, or be taken as a capital gain on closure. The gain on closure can be taxed as low as 10%, compared to the 25% on higher rate dividends. You just need to take a long term view.

You could of course also use the retained money to buy property, invest in shares etc. but these are more complicated options that would potentially require more planning. Talk to an IFA & your accountant.

[Platypus]

What's the best approach to follow:
To withdraw all the profits as dividends as soon as one can or to keep part of the warchest in the company accounts...?

With the end of the financial year fast approaching, personally I'd take the max possible without straying into the 40% tax band. This means that neither you nor the company have any more tax to pay over and above CT.

With the limit for 40% tax being £42k, hopefully money is coming in to the company faster than it leaves. So your problem is how to get money out in a tax efficient way. I can't see any benefit in leaving it in the company while you're below the £42k limit.

N.B. My opinion only !!

[rambaugh]

Keeping retained profits in the company and boxing off from further income tax is useful but I suppose the other downside of this strategy is that if you ever get sued by a company or client for negligence then the capital you've preserved in your company is at risk. This is why its advisable to have insurance if you're retaining your profit.

[Platypus]

Keeping retained profits in the company and boxing off from further income tax is useful

If you're going to make a statement like that, please explain why.

If you mean to stop being personally taxed at 40% then I agree of course.

[rambaugh]

If you're going to make a statement like that, please explain why.

If you mean to stop being personally taxed at 40% then I agree of course.

That's what I meant. I can't think of too many other reasons why a director would leave shareholders funds sitting dormant earning little or no interest unless of course they had a strategy for deploying capital for productive use.

[northernladuk]

That's what I meant. I can't think of too many other reasons why a director would leave shareholders funds sitting dormant earning little or no interest unless of course they had a strategy for deploying capital for productive use.

One of them is called a warchest. Not sure why this is such a struggle for you.

[Platypus]

One of them is called a warchest. Not sure why this is such a struggle for you.

I see no reason to have a "warchest" in the company account instead of my own !

But I'm all ears.

[kingcook]

I see no reason to have a "warchest" in the company account instead of my own !

But I'm all ears.

How's this for a good reason...

With the end of the financial year fast approaching, personally I'd take the max possible without straying into the 40% tax band. This means that neither you nor the company have any more tax to pay over and above CT.