What do you do with your surplus cash?

[dmuk]

My business bank account has a decent amount of cash in it. I do not need to pay any outgoings (tax, dividend etc) for a while and wanted to know what others do with the surplus cash?

Do you just park it in a business savings account? With the same bank or another? Any recommendations?

To confirm - any earnings are taxable income for the company?

[Kenny@MyAccountantFriend]

Provided the funds are invested in the company name you can invest them how you want.

An IFA would be best placed to advise on the options available.

You are correct though any profits made would be taxable as income for Corporation Tax.

[Maslins]

Typically most people would either leave in a (company) savings account for a rainy day, or stick a large lump into a pension scheme.

[TheFaQQer]

Do you just park it in a business savings account? With the same bank or another? Any recommendations?

Yep - CACB and Aldermore were the best when I was looking last year. I keep the balances at less than £85k in each bank to make sure they are still protected by the FSCS.

To confirm - any earnings are taxable income for the company?

Yes.

And a wodge also goes into the pension plan for myself and the same into the pension for the company secretary.

[dmuk]

And a wodge also goes into the pension plan for myself and the same into the pension for the company secretary.

Thanks.

How does the pension plan bit work?

Do you take after tax money and put it into a pension plan account - pension fund pays you back tax? So essentially the money is tax free? Pension is in your name (and not the company)?

Aldermore currently offers the best rate. £85k is protected. Sadly 1.5% is the best option at the moment for cash accounts.

[TheFaQQer]

Thanks.

How does the pension plan bit work?

Do you take after tax money and put it into a pension plan account - pension fund pays you back tax? So essentially the money is tax free? Pension is in your name (and not the company)?

Aldermore currently offers the best rate. £85k is protected. Sadly 1.5% is the best option at the moment for cash accounts.

I pay directly from the company into the pension plan. If you pay as an employee contribution, it's limited to the amount you earn as salary (so no dividends) which may be restrictive if I pay in a larger lump sum. That is then an expense, so lowers the corporation tax bill.

IIRC, if you were going to pay in less than your salary, it is more tax efficient to take the money and then pay it in personally and claim relief on that contribution, but that's not what I do.

Last year, CACB were doing 1.49% on a 30 day account, but they seem to have changed that to a lower rate and longer time period.

[TheFaQQer]

One thing to bear in mind, is that if you cease trading and want to take entrepeneur's relief, having investments (even if you are just sticking money in a fixed-term account) will prevent that.

There was a thread recently about someone having money locked away in Aldermore and they were advised that because it was a significant sum of money, the company would be classed as an investment firm so wouldn't be able to shut down and claim the relief.

[TheFaQQer]

Have a look here - Best Business Savings Accounts Comparison at MoneySuperMarket - and see if there is anything better out there.

I'd guess not at the moment, if interest rates are going to go down further.

Depending on how long you want to lock money away for, you'll get higher. Not on that list but doing a better rate if you are after a two year account is the State Bank of India, for example.

[TheCyclingProgrammer]

Nothing. I can't be arsed to faff around with low interest savings accounts for the sake of a few hundred quid. For the most part, after liabilities, I think of the rest as my warchest and nothing more.

As it grows, I intend to start thinking about a pension but need to speak to an IFA. Let's get the house purchase out of the way first.

[TheCyclingProgrammer]

One thing to bear in mind, is that if you cease trading and want to take entrepeneur's relief, having investments (even if you are just sticking money in a fixed-term account) will prevent that.

I don't think it's black and white; it comes down to whether or not HMRC deem you to be a trading or close investment company. I vaguely recall that so long as the majority of your income is trading income then you should still be eligible for ER.

It obviously goes without saying that anyone thinking about making significant investments of company funds should speak to their accountant about this beforehand. It's definitely something you need to consider.