Reply to: How would you protect >£75k held in your company bank account

[Crack Addick]

Huh, you haven't used employer contributions into a SIPP because you don't trust the government? It's one of the most efficient ways to save tax.

Don't you think it's more likely that a bank will take your money from an account than the global stock market collapsing?

Madness.

I agree pension contributions are Tax efficient and also an IR35 silver bullet. But "Madness" is trusting the Govt not to change the pension rules for the worse over the next 20-30 years. Currently the rules seem to change every time the Chancellor stands up to make a Budget Statement. For example the LTA over the last 6 years was reduced from £1.8 Mio to £1.0 Mio. That may still seem a lot now, but I doubt it will look so big in 20-30 years time. (Just like IHT and the 40% tax rate was only paid by a select few 20-30 years, now a lot of "average" people in the SE can easily be caught by both)

Also, once that money is in a pension you will realistically not be able to touch it until you are 55. Before then I will have a bigger property to buy and children to bring up, so need to be able to access the money when necessary. Hence after making some lump sum SIPP contributions in the first few years of contracting I've always loaded up my ISA and then other Tax efficient saving products instead.

ChimpMaster - This isn't any use for huge amounts of money, but would still offload a few '000's depending on your profits. But I always pay my Corp Tax in full as early as possible and also make payments on account for the next years liability.

As below HMRC will very kindly pay you 0.5% to look after you money until the Tax bill is due

https://www.gov.uk/government/public...by-instalments

[itjobs]

...per authorised bank or building society

£75,000 is per financial institution (includes Building Society) per person per account. So, if you have two accounts (non-joint), one in HSBC and the other in First Direct OR one in Halifax and one in Bank of Scotland, you are covered for £75,000 only. It used to be £85K though.

[Gaz_M]

I'm on nothing like Crack rate wise, but due to living near the big smoke my expenses are very low. I didn't pay into a pension for the first few of my contracting yrs as I wanted a bit of a war chest, so it built up a bit and I've not yet been out of work and had to dip into it.

Yes, I think it's expenses that's screwed me over the years. Living in the East Midlands I've always struggled to find local work. I'm also on nowhere near Cracks rate either.

[blackeye]

Anywhere between £600-800 p/d depending on the Bank and how straight a face I can keep when I tell them the rate.....

Like you I kept myself under the 40% threshold. Although being not that close to retirement and not trusting the Govt, I haven't been putting anything into my pension for the last 5 years.

I used to use Santander and Saffron BS for my company savings and had £75k+ in both. If I wasn't going to be closing my company then I would have opened up an account with Aldermore to split things further.

Huh, you haven't used employer contributions into a SIPP because you don't trust the government? It's one of the most efficient ways to save tax.

Don't you think it's more likely that a bank will take your money from an account than the global stock market collapsing?

Madness.

[youngguy]

Can I ask what kind of rates you guys are on?

I've been contracting 14 years but have nowhere near the amounts in my Ltd that you guys are talking about

I take out min salary plus divs up to allowance.

I'm on nothing like Crack rate wise, but due to living near the big smoke my expenses are very low. I didn't pay into a pension for the first few of my contracting yrs as I wanted a bit of a war chest, so it built up a bit and I've not yet been out of work and had to dip into it.

And there is me sealing my fate, will get terminated tomorrow I expect

[Crack Addick]

I guess it's easiest to move all the funds into the main account so that the liquidator only has to deal with the one bank.

that's when the crash will happen!

Probably I'm drifting O/T. But what would happen if the bank that the Liquidator used went under, after they had taken control of your Companies money?

Do liquidators only use the Big 4 Banks and are the funds fully segregated or simply commingled with other companies money that the Liquidator holds?

[Crack Addick]

Can I ask what kind of rates you guys are on?

I've been contracting 14 years but have nowhere near the amounts in my Ltd that you guys are talking about

I take out min salary plus divs up to allowance.

Anywhere between £600-800 p/d depending on the Bank and how straight a face I can keep when I tell them the rate.....

Like you I kept myself under the 40% threshold. Although being not that close to retirement and not trusting the Govt, I haven't been putting anything into my pension for the last 5 years.

I used to use Santander and Saffron BS for my company savings and had £75k+ in both. If I wasn't going to be closing my company then I would have opened up an account with Aldermore to split things further.

[Gaz_M]

Can I ask what kind of rates you guys are on?

I've been contracting 14 years but have nowhere near the amounts in my Ltd that you guys are talking about

I take out min salary plus divs up to allowance.

[Lewis]

How many?

You must have run out of unaffiliated banks / building societies by now?

I wish! Cambridge & Counties and Aldermore (plus Cater Allen for current account).

[jmo21]

So you guys open multiple accounts, stick in 75k and just let it sit there?

Does each bank not charge you monthly fees (perhaps balanced out by the small amount of interest the 75k will earn)?

When it comes to retirement and the MVL, I guess it's easiest to move all the funds into the main account so that the liquidator only has to deal with the one bank.

Aldermore's are deposit accounts, and don't charge. They're all fixed term earning between 1.8 and 2.1%

I have the next 4 years corp tax (rough estimate based on past trading) stored away maturing not long before each year is due.

nothing spectacular, and I know I could well do a lot better if I withdrew it (some) from the company, took the hit on personal tax and did other things with it, but I am very much risk averse at the moment.

[youngguy]

If you're in the earlier stages of your career, you likely won't want to be putting the bulk of your money into something where you'll unlikely be able to access it for 30odd years. Given house prices etc, most younger people want the money now to help them get together cash for a deposit etc.

I guess for those who are closer to pension age, the ability to NOT buy an annuity perhaps makes MVLing not as obvious a choice,

Where the numbers are big, worth having a proper think about what you want to do/when you want money, and doing some mock calculations

I've been mulling these things over in the last year. I'm not a higher rate tax payer and so far have elected to leave surplus in the business (I max out pension every yr) as I haven't found any vehicle that can offset the tax hit I would have if I take the money out .....and certainly not with the small risk appetite I have!

As the figure grows that may change. Ie buying a second property.

In the meantime I should probably start splitting the company retained profit across multiple accounts for the protection. Can I just do this or do I have to keep account /notify anything/anyone?

[Maslins]

It seemed a good idea to me to deplete the MyCo Ltd account by paying into my SIPP. It won't work for everyone but - It IR35 proofs the money, defers income tax on the money, avoids all NICs, reduces corporation tax to nil on that money, I can draw 25% of it tax free and the money is held outside your estate in trust. So nobody can touch it and if the SIPP provider goes bust the money is still there. What's not to like if you're an older bloke?

I think that last sentence is key. If you're in the earlier stages of your career, you likely won't want to be putting the bulk of your money into something where you'll unlikely be able to access it for 30odd years. Given house prices etc, most younger people want the money now to help them get together cash for a deposit etc.

I guess for those who are closer to pension age, the ability to NOT buy an annuity perhaps makes MVLing not as obvious a choice, as if you chuck loads into a pension you potentially can withdraw it in a huge chunk a bit later, rather than being restricted to a drip fed income for rest of life. However, do consider the tax impact of doing that. Eg if you take out (say) £100k from your pension in one tax year, you could pay a hefty chunk of tax, potentially far more than the normal 10% CGT after entrepreneurs relief.

Where the numbers are big, worth having a proper think about what you want to do/when you want money, and doing some mock calculations...but then also factoring in the chancellor could change things completely at the drop of a hat

[Maslins]

When it comes to retirement and the MVL, I guess it's easiest to move all the funds into the main account so that the liquidator only has to deal with the one bank.

Yes.

Legally no reason why a liquidator can't write to half a dozen different banks. Main issue with that is each will respond on their own timeframe, so if you've got (say) £350k split £70k each in 5 accounts, it won't be a nice simple case where the liquidator suddenly gets £350k and can do a big distribution.

If you're prepared to pay extra for it, they may well do a distribution when each bank transfers money to them shortly after it happens. Alternatively they can wait until (say) 3 of the banks have responded, then distribute based on that.

Still, easiest thing would be to transfer it all to one account prior to liquidation...and based on our experience if you want a quick turnaround, make it either Barclays or Cater Allen.

[Fred Bloggs]

It seemed a good idea to me to deplete the MyCo Ltd account by paying into my SIPP. It won't work for everyone but - It IR35 proofs the money, defers income tax on the money, avoids all NICs, reduces corporation tax to nil on that money, I can draw 25% of it tax free and the money is held outside your estate in trust. So nobody can touch it and if the SIPP provider goes bust the money is still there. What's not to like if you're an older bloke?

[pr1]

Per law, everyone is protected for up to £75K (irrespective of and if it is a joint account it is protected for £75K X 2. A better option would be to invest excess amount in property.

UK Banks & Building Societies | Deposit Guarantee |FSCS

...per authorised bank or building society