Emergency Fund in Personal Account

[xenomorph]

Hello
So I always leave at least 6 months worth of funds in my company as a rainy day fund for in-between contracts.
Now usually permies would set aside savings for emergency fund in personal account.
If contractor was to do that then of course it would be post tax as dividends or salary but not sure the tax hit is worth it to keep money aside if you can keep it in company and only withdraw and pay tax if you do end up needing to use it. Only reason to withdraw I suppose is to put into ISA or savings account.

[WTFH]

Hello
So I always leave at least 6 months worth of funds in my company as a rainy day fund for in-between contracts.
Now usually permies would set aside savings for emergency fund in personal account.
If contractor was to do that then of course it would be post tax as dividends or salary but not sure the tax hit is worth it to keep money aside if you can keep it in company and only withdraw and pay tax if you do end up needing to use it. Only reason to withdraw I suppose is to put into ISA or savings account.

What is your question?

If you want to know what people do for a warchest, it varies.
An ISA isn’t generally an “emergency fund” as you’ll have restrictions on access. Instant access savings accounts or premium bonds will give you fast access to cash, but you’ve not told us what your concern is, so any advice we give will be based on our own personal circumstances.

[xenomorph]

What is your question?

If you want to know what people do for a warchest, it varies.
An ISA isn’t generally an “emergency fund” as you’ll have restrictions on access. Instant access savings accounts or premium bonds will give you fast access to cash, but you’ve not told us what your concern is, so any advice we give will be based on our own personal circumstances.

So question is do people keep emergency fund in ltd company and withdraw as divided and salary when needed or withdraw it and pay the tax due just to have it available?

[WTFH]

So question is do people keep emergency fund in ltd company and withdraw as divided and salary when needed or withdraw it and pay the tax due just to have it available?

Both.
Manage the company finances so there are funds there to pay employees.
Separately, manage personal finances so there are available funds there to cover some emergencies.

They are two separate pots of money, and in my opinion, both should be managed appropriate to the level of risk and speed of access that suit your business and your personal financial viewpoint.

[Paddy]

Problem solved.
Next

[SueEllen]

Problem solved.
Next

I wonder if burglars still take coin collections?

[ladymuck]

I swap all excess cash into Krugerrand and keep them in a safety deposit box in Hatton Garden.

[vetran]

Just borrow a few quid off your Butler!

[Protagoras]

So question is do people keep emergency fund in ltd company and withdraw as divided and salary when needed or withdraw it and pay the tax due just to have it available?

Over the years, my policy was always to minimise funds in the LtdCo, while ensuring enough to pay liabilities. My rationale being that taxes only really ever go up, so more beneficial sooner rather than later to move funds to a tax-free personal asset.

[northernladuk]

So question is do people keep emergency fund in ltd company and withdraw as divided and salary when needed or withdraw it and pay the tax due just to have it available?

Yes of course they do. It's the hallowed war chest we are always banging on about. It's there to allow you to carry on in lean times which would mean just continuing to pay/divi as normal. I don't understand your comment about 'available'. It's available in the company. If you mean available in the current account then it's just too tempting to use it on something and fritter it away. Keep it in the company and out of temptations way.

Easy to think you'll never need it but when you do it's an absolute godsend, and to some people a life saver.

No point paying extra tax on it if you don't need to. Does sound like you are angling at somethign and wanting us to give you the nod to pull it out or something.