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Reply to: Buy stocks with my ltd
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Previously on "Buy stocks with my ltd"
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Originally posted by northernladuk View PostHere is a guide. And that bottom paragraph is rubbish.
How to Manage a Cash Surplus in a Limited Company | Nixon Williams Accountancy
There is also the fact stocks go up as well down. Bit of a crash and you are going to lose significant amounts of money doing something you don't know much about.
But I bet all that makes no difference.
1. Stock going up and down: this is to be expected when buying stock there is a risk of picking the wrong one. But there is a sure and safe way to win is to pick an index fund (FTSE, s&p 500, etc). You may loose on short term but over long term (could be 10 years) it will go up. So I'm not worried about that.
2. The risk of becoming a CIC: in the past it was problematic because the corporation tax for CIC was 28%. Now there is only one and it's 19%. So no difference.
3. Entrepreneur relief: yes if my plan was to wind down my company at some stage, but I'm happy to keep it so I continuously receive wage even when I stop working.
So really I don't see problem. The money is liquid so if I decide to create my own business, i can just sell my shares and get cash for my next company.
All this, assuming the maximum allowance is taken before the highest tax bracket kicks in!Last edited by Contractor UK; 25 May 2019, 13:13.
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Originally posted by cwah View PostCan you give example on why it would be a bad idea? It looks like the best way to accumulate retained funds.
Main issue to me is that it needs more paperwork. So of course the accountant would tell you its bad to do that
How to Manage a Cash Surplus in a Limited Company | Nixon Williams Accountancy
There is also the fact stocks go up as well down. Bit of a crash and you are going to lose significant amounts of money doing something you don't know much about.
But I bet all that makes no difference.Last edited by Contractor UK; 25 May 2019, 13:12.
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Originally posted by cwah View PostCan you give example on why it would be a bad idea? It looks like the best way to accumulate retained funds.
Main issue to me is that it needs more paperwork. So of course the accountant would tell you its bad to do that
Sorry to bother you.
Crack on.
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Originally posted by Maslins View PostGenerally speaking dividends received into a company won't suffer corporation tax...but that's predominantly as remember dividends are a distribution of post corporation tax profits from the company paying it.
Threads like this come up all the time ("I want to invest my company's war chest in something with higher returns than a deposit account"). Then there's a bunch of accountants all saying it's a bad idea, with multiple valid reasons why. Then the OP ignores them as they'd made their decision before posting the question.
Main issue to me is that it needs more paperwork. So of course the accountant would tell you its bad to do that
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Originally posted by fiisch View PostSorry, but this is utter insanity.
The current pension laws are generous - take advantage while you can.
If you're maxing pension contributions (or in danger of breaching Life Time Allowance) and extracting up to the higher dividend tax allowance, only then would it be remotely worth considering to invest company funds.
I know it's important to have something planned for my retirement, and I'm not saying I won't do it. Just that not now!
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Originally posted by cwah View PostThanks for the advice. I'm going to apply for the code then.
Just a couple of point:
- I don't invest anything in my pension because I can't be bothered to wait for 20 years until I can get a penny out of it. I know pension is important, but I may have cash requirement at some stage and don't want to be locked. I'd probably start investing in my pension in 10 years time.
- I didn't get the difference between not being taxed for dividend and being taxed for profit? If I receive £1k in dividend, I won't pay dividend tax. So no tax although I earned money out of it?
The current pension laws are generous - take advantage while you can.
If you're maxing pension contributions (or in danger of breaching Life Time Allowance) and extracting up to the higher dividend tax allowance, only then would it be remotely worth considering to invest company funds.
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Originally posted by Lance View PostI think you’ve missed the best reason to use a LTD as an investment vehicle. You can offset losses against your CT liability.
Without that you’d be better off taking the money out and investing it personally.
With that you’d still be better off taking it out and investing it personally.
That’s just my opinion though.
Next I’lol challenge your original assumptions.
1 - The LTD doesn’t pay tax on the dividend it receives. It does pay tax on profit though.
2 - depends on the liquidity requirements. After you’ve covered CT and VAT liabilities, got a decent war chest, maxed out the dividends to higher rate threshold and your pension, then you’ve got cash left to invest. At that stage it might be worthwhile investing and risking it all, but as you still need to get it out at some point you need a longer term plan.
Whilst the company may not pay corporation tax on the dividends it receives, you will still pay income tax on the dividends that you then take from the company (which could originate from dividends received by the company).
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Generally speaking dividends received into a company won't suffer corporation tax...but that's predominantly as remember dividends are a distribution of post corporation tax profits from the company paying it.
Threads like this come up all the time ("I want to invest my company's war chest in something with higher returns than a deposit account"). Then there's a bunch of accountants all saying it's a bad idea, with multiple valid reasons why. Then the OP ignores them as they'd made their decision before posting the question.
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just a note that your accountant might charge you more if you deal in stocks with the company as there is more work to do. best to check with them to avoid a surprise fee.
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Originally posted by TheGreenBastard View PostCTM15150 - Company Taxation Manual - HMRC internal manual - GOV.UK
"A distribution made by a UK resident company and received by a UK resident company is generally not included in the recipient company’s CT profits."
So the key thing is don't invest in companies outside the UK for dividend returns to a LTD company.
Are all LSE listed companies 'UK resident'? I'd assume so but it is an assumption.
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Originally posted by cwah View PostHello
I have some left over cash in my company and I'd like to use it to buy stock for 2 reasons:
- dividend paid to company are not taxed
- it's better than having cash laying around
Do you know where I can do that? I wanted to open it on ii.co.uk but they asked for my Legal Entity Identifier. This is a number for financial institutions which I'm not (just a simple 1 man contractor)
Any idea what to do?
Thank youLast edited by TheGreenBastard; 12 May 2019, 17:59.
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Originally posted by Lance View Post£1k dvidend, is £1k profit for your company. Congratulations. You've avoided 7.5% dividend tax and replaced it with 19% corporation tax.
"A distribution made by a UK resident company and received by a UK resident company is generally not included in the recipient company’s CT profits."
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Originally posted by cwah View PostThanks for the advice. I'm going to apply for the code then.
Just a couple of point:
- I don't invest anything in my pension because I can't be bothered to wait for 20 years until I can get a penny out of it. I know pension is important, but I may have cash requirement at some stage and don't want to be locked. I'd probably start investing in my pension in 10 years time.
- I didn't get the difference between not being taxed for dividend and being taxed for profit? If I receive £1k in dividend, I won't pay dividend tax. So no tax although I earned money out of it?
On pensions - learn about compound interest. It's the most powerful force in the universe. Einstein's Theory of Compound Interest - Intentional Wealth Advisors
Start your pension now....
£1k dvidend, is £1k profit for your company. Congratulations. You've avoided 7.5% dividend tax and replaced it with 19% corporation tax.Last edited by Lance; 12 May 2019, 13:58.
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Thanks for the advice. I'm going to apply for the code then.
Just a couple of point:
- I don't invest anything in my pension because I can't be bothered to wait for 20 years until I can get a penny out of it. I know pension is important, but I may have cash requirement at some stage and don't want to be locked. I'd probably start investing in my pension in 10 years time.
- I didn't get the difference between not being taxed for dividend and being taxed for profit? If I receive £1k in dividend, I won't pay dividend tax. So no tax although I earned money out of it?
Leave a comment:
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