Keep money in the Business or take it out

[eddie1507]

Cheers Guys makes sense.

My war chest will be the retained profit in the company i have low monthly outgoings so should be enough for 4 years drawing it out but keeping below higher rates dividends..
Maybe it is time to consider a pension

[The Spartan]

Personally I never see a reason why you wouldnt withdraw it IF you could stay below 40% bracket.

Pointless keeping £100K in business and then thinking feck I want it all now but Ive got to pay 40% now on some of it.

It's not 40% though is it? It's 25% as you get the 10% dividend credit before the new tax year assuming you want to withdraw it as dividends.

[northernladuk]

Personally I never see a reason why you wouldnt withdraw it IF you could stay below 40% bracket.

Pointless keeping £100K in business and then thinking feck I want it all now but Ive got to pay 40% now on some of it.

What?

[psychocandy]

Personally I never see a reason why you wouldnt withdraw it IF you could stay below 40% bracket.

Pointless keeping £100K in business and then thinking feck I want it all now but Ive got to pay 40% now on some of it.

[Louisa@InTouch]

Agreed NLUK!

If you plan on contracting for the next 20 years, advice would be to leave it in there. If you do want some more cash and likely to go above the basic rate band next year, accelerate your dividends. You'll just need to bear in mind that you will pay higher rate tax on this first, before it's in your hands.

On the other hand, if you are looking to stop contracting soon, you might want to do this sooner rather than later - with the possible changes to entrepreneurs relief from April 2016 onwards.

If you are thinking of closing your company, there could be a couple of options that you might want to consider...

[northernladuk]

It depends. What are you going to do with the money? Spunk it up against the wall? Pay the mortgage off? Anything that makes it unavailable. How much would you leave in as a war chest? What are your circumstances? Cash rich personally, guaranteed to get gigs or a bit strapped and chequered history.

I don't think there is a right answer to such a generic question.

[PerfectStorm]

If you're planning to go into the higher rate (above 42k take home inc divs and salary) then it'll be cheaper to do so before April assuming you make as much money in the next tax year.

If you dont think that'll be necessary, you might want to defer it until after the new tax year?

I suppose you could always hedge your bets by taking out half in each year?

[eddie1507]

Hi Guys,

Looking for some guidance from fellow contractors and none of the 'Ask Your Accountant', i will have around £80k in the business bank after corporation tax this year with everything that is going on with contractors will i be better to take the hit on Personal tax and draw some of that profit down or retain it in there for the following year ?

I don't need any of it ATM but just caution with all these changes that are happening i don't want to be in a situation in a year where it's going to cost me alot more than just personal tax to get it out.

Cheers Guys