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Investing Company Profits/Savings

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    Investing Company Profits/Savings

    Apologies if I'm reposting something that has been answered many times before. It's my first post here.

    I've been contracting for around 9 months now and have started to build up a nice buffer in my company account. My question is, what is the best thing to do with the profits. My bank offers savings accounts with pretty much non-existant interest rates. I would have though trying to put this money to work would be the right thing to do.

    I'm not adverse to a little risk either, like investing in a fund/tracker/stocks (I do this personally already). But.....I'm not if that's possible for a LTD company, or if it is, where to start.

    Any advice from others would be greatly appreciated.

    #2
    This has been discussed quite a bit.

    https://www.google.co.uk/search?q=si...ng+ltd+company

    Yes, it is possible. You can get Ltd company accounts from Selftrade, Interactive Investor, TD Direct, HL to name a few.

    You will pay corporation tax on investment profits, although you do get an indexation allowance. If you build up large amounts of money in the company then you eventually face the problem of getting it out.

    It is preferable to get as much money out as you can. Salary and dividends up to the higher rate tax, maximum contribution into a SIPP. Maybe have a warchest in the Ltd company that would cover you for a year or two, but keep that in cash or short term bonds unless you really want to invest it. You can find high(er) interest savings accounts but you will have to shop around.

    Comment


      #3
      Bear in mind this 'buffer' would likely belong to the tax man as you haven't paid any CT yet.

      Best to build up a buffer for your war chest and accrued CT/VAT rather that risk blowing money that isn't yours at this early stage.

      Comment


        #4
        Originally posted by stek View Post
        Bear in mind this 'buffer' would likely belong to the tax man as you haven't paid any CT yet.

        Best to build up a buffer for your war chest and accrued CT/VAT rather that risk blowing money that isn't yours at this early stage.
        This. Get yourself a 6 to 12 month warchest above and beyond your tax liabilities and then start thinking what to do with the excess.

        Look for high interest accounts before investing. Aldermore for example.
        'CUK forum personality of 2011 - Winner - Yes really!!!!

        Comment


          #5
          As others have stated, be sure to have your liabilities covered and a war chest that covers a resonable amount of time.

          Beyond that I'd generally argue investing a surplus is a good idea. The first thing you can do is open up a SIPP and invest that. Then obviously invest extra money in the Ltd. I'd suggest you go with the boring slow and steady index funds, beyond that you're obviously aware of the risk.

          Comment


            #6
            Thanks a lot guys! All makes very good sense. I hadn't really give enough though about the need to eventually get the money out of the company or making full use of my SIPP allowance.

            One more question if I may: You mention building up a warchest of 12-24 months first, which sounds very sensible. Do you mean 12-24 months of normal living expenses (i.e. the amount I transfer from the LTD company to my personal account each month), or a larger number (i.e. closer to what I bill my clients each month).

            Comment


              #7
              Some (including myself) put some spare company quids into RateSetter (peer to peer lending). There is a tiny tiny risk, but it only ties my money up for a month at a time and I have no problem getting the equivalent of 3.7% annual return. You can get a higher rate if you are happy tying your money up for longer.
              Taking a break from contracting

              Comment


                #8
                Originally posted by welshdragon82 View Post
                Thanks a lot guys! All makes very good sense. I hadn't really give enough though about the need to eventually get the money out of the company or making full use of my SIPP allowance.

                One more question if I may: You mention building up a warchest of 12-24 months first, which sounds very sensible. Do you mean 12-24 months of normal living expenses (i.e. the amount I transfer from the LTD company to my personal account each month), or a larger number (i.e. closer to what I bill my clients each month).
                Why would your warchest be related to what you bill you client though?? What you need to live on personally and what your company bills the client are two different things. Very basic concept of contracting you must learn quickly

                The question you should be asking is is your 6 month warchest the absolute minimum you need to survive for 6 months or is it at the level you'd enjoy if you were still in a gig.... If that makes sense.
                Last edited by northernladuk; 6 December 2015, 22:59.
                'CUK forum personality of 2011 - Winner - Yes really!!!!

                Comment


                  #9
                  Originally posted by chopper View Post
                  Some (including myself) put some spare company quids into RateSetter (peer to peer lending). There is a tiny tiny risk, but it only ties my money up for a month at a time and I have no problem getting the equivalent of 3.7% annual return. You can get a higher rate if you are happy tying your money up for longer.
                  Can I open an account in the company name with RateSetter (I use them personally but their FAQs say

                  Who can invest with RateSetter?

                  To invest with RateSetter you must:

                  - have a UK bank account, and
                  - be at least 18 years of age.

                  We will also need to be able to confirm your identity. We can usually do this automatically, but occasionally we will have to confirm details with you directly.

                  Comment


                    #10
                    I would expect that a company needs some sort of consumer credit licence to engage in peer to peer lending. The added compliance requirements may make it difficult to find anybody to take corporate money in modest amounts.

                    Comment

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