Carried Forward / Distributed amount. Keep or take out?

[northernladuk]

Quality post from Maslins as usual. Some extra points for maybe newer contractors.

No idea what "a fair old amount" is...but worth stressing blindly sticking to the basic rate band isn't always the optimal route.

Totally and we see plenty of posts where the contractor is sticking to the bands and making things complex. They are the most efficient but no the be all and end all.

Sure, if you make profits post CT of (say) £70k one year, and aren't confident the following year will be as good, then restricting dividends to basic rate band makes sense.

If you're consistently making post CT profits of £100k+, no expectation to stop soon,

And although there is a clear distinction the newer contractors need to be very wary here. We all expect to be making profits of 100k+ year in year out.. until we aren't. I've literally seen a grown mine cry when a contract got ended at short notice. Personally I've been almost end to end for 10 years until I get hit with a 6 month bench period. On top of that you have to expect to go inside in this day and age.

Big area of risk in contract and it's not as clear as it is before. Just a warning point.

If you leave it in the company, there's plenty of low risk but also low interest savings accounts. Those are fine. Be a bit cautious about anything more quirky than that (eg investment funds, crypto, BTL property)...at least run it by your accountant first.

Good point. Seems obvious but you wouldn't believe the number of people that have popped up with big problems because they didn't do the above.

[Maslins]

No idea what "a fair old amount" is...but worth stressing blindly sticking to the basic rate band isn't always the optimal route.

Sure, if you make profits post CT of (say) £70k one year, and aren't confident the following year will be as good, then restricting dividends to basic rate band makes sense.

If you're consistently making post CT profits of £100k+, no expectation to stop soon, then whilst the accountant in me admires the frugality, treat yourself! Perhaps forget the basic rate band as your mental limit and jump to £100k total personal income (ie bit before you start losing your personal allowance). Sure, your personal tax bill will jump from ~£3k to ~£20k. That is a big jump. But your post tax income will jump from ~£47k to ~£80k. Also a big jump.

Pension is another option for excess cash. If you're not already putting £40k/year into that, worth considering.

Finally if you think you might shut up shop soon then can make sense to stockpile in anticipation of an MVL.

If you leave it in the company, there's plenty of low risk but also low interest savings accounts. Those are fine. Be a bit cautious about anything more quirky than that (eg investment funds, crypto, BTL property)...at least run it by your accountant first.

[Lance]

yes. That's yours to take (Carried forward / distributable)
I would take it all up to the higher rate. And top up your pension.

You could potentially take more and go into the higher rate...
I have considered doing that as if I recall correctly 7% inflation halves your money in 10 years. So is it worth paying 32.5% tax now and stashing it into an investment rather than have it devaluing.
But inflation isn't likely to be that high for long (or is it?)
and are you realistically going to keep the money in the company for 10 years anyway?

What's your plans for the next 2-3 years? As that will best determine the correct course.
If you end up with an inside gig you could be looking at 37.5% tax on your distribution. So maybe paying 32.5% now is worthwhile for that reason alone.

Only you can answer.

[northernladuk]

You need to think at your business worst case. What if you are out of work for 6+ months and that money is all tied up? Is your warchest in the company or in your personal savings? That will give you an idea of what chunk needs keeping in the business for a rainy day and not for investing it or moving around. That might mean you don't have much of a decision to make on the rest or your 'chunk' could still be so big you need to look at using it better.

Get the bottom line sorted and find out what is actually spare and then start thinking about what to do with it.

Using the google search method to search for what to do with spare cash. Many many threads about it and from what I remember there aren't many investing opportunities. Aldermore's business saving accounts are going up but not from much, i very much doubt you want to touch shares and bitcoin is far too dangerous so leaving it might be the best option at the moment.

Just be careful of the total 'chunk' as well. If it's over 75k you are best moving it around whatever the above brings.

[ApeShape]

Coming from Freeagent, as I understand it the Carried Forward is the amount that's immediately available to be paid out either as a Dividend or Salary. I've got a fair old amount stashed away in this box. I'm acutely aware that inflation is doing me no favours by keeping this money static. What should I do about it? Keep some or smash the piggy bank and immediately pop it into a savings account? Obviously the assumption here is I'm in BR and don't slip outside it.