Reply to: Emergency Fund in Personal Account

[ladymuck]

Not in a suite case under the sofa?

A three piece suite?

[BlueSharp]

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

Not in a suite case under the sofa?

[vetran]

Or keep the money in the company and draw it out in the years you don't have an income.

Of course this means you are outside IR35.

[northernladuk]

Well I will be first. Thats all I needed to know from people, I see no reason in extracting and paying tax on money I dont actually need to use. So better to keep it somewhere where it will stay until I need it.
On another topic after what Tories done with decreasing personal allowance I might see how much difference in post tax monthly income there is between contracting at current day rate vs a permie job between 90k to 110k salary. I think it may be time to go back to permie from 2024 lol

Plenty of people have. With a good number of inside gigs now the difference is shrinking. Some long term contractors with plenty of years posting on here have made the jump in the last few years. Worth running the numbers and having a think.

[xenomorph]

The other option is to draw it out on top of what you need to live so incur extra tax so why would you do that? Makes no sense really. Once you've got more than 6 months at full rate you push towards a year at full rate and after that you can start taking more out personally. You don't need a personal warchest as such, they are your savings to cover whatever you need in life like new kitchen, cars etc. Keep it separate from your income to cover periods of not working. I've seen a grown man burst in to tears when he got canned on a long gig after getting complacent with all his money and spunking it away.

Spend some time in the prof forums. Nearly every question like this ends up somewhere else once we've been drip fed by the OP so just habit.

Well I will be first. Thats all I needed to know from people, I see no reason in extracting and paying tax on money I dont actually need to use. So better to keep it somewhere where it will stay until I need it.
On another topic after what Tories done with decreasing personal allowance I might see how much difference in post tax monthly income there is between contracting at current day rate vs a permie job between 90k to 110k salary. I think it may be time to go back to permie from 2024 lol

[northernladuk]

I was just curious as to if people keep spares in company and have personal war chest or just 1 in the company as we can withdraw it as dividends if we were inbetween contracts and needed to pay bills etc.
I already have enough funds in my company but no personal warchest so no was not angling a reason to withdraw...do not jump to conclusions.

The other option is to draw it out on top of what you need to live so incur extra tax so why would you do that? Makes no sense really. Once you've got more than 6 months at full rate you push towards a year at full rate and after that you can start taking more out personally. You don't need a personal warchest as such, they are your savings to cover whatever you need in life like new kitchen, cars etc. Keep it separate from your income to cover periods of not working. I've seen a grown man burst in to tears when he got canned on a long gig after getting complacent with all his money and spunking it away.

Spend some time in the prof forums. Nearly every question like this ends up somewhere else once we've been drip fed by the OP so just habit.

[xenomorph]

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.

I was just curious as to if people keep spares in company and have personal war chest or just 1 in the company as we can withdraw it as dividends if we were inbetween contracts and needed to pay bills etc.
I already have enough funds in my company but no personal warchest so no was not angling a reason to withdraw...do not jump to conclusions.

[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.

[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.

[vetran]

Just borrow a few quid off your Butler!

[ladymuck]

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

[SueEllen]

Problem solved.
Next

I wonder if burglars still take coin collections?

[Paddy]

Problem solved.
Next

[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.

[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?