IS LEAVING MONEY IN YOUR LIMITED COMPANY A BAD IDEA?
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- เผยแพร่เมื่อ 10 ก.ค. 2021
- Wondering about whether you should take out money out your limited company before your year end? Owners worry about this one a lot.
In this video Dan runs through the question.
Topics include:
Corporation Tax UK
Personal Tax UK
Does leaving money in a limited cost you more tax
Is a best to leave money in your company
Should I take out all my money from my company
..... and more!
You can see more about what we get up to on the following:
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Podcast: heelanhub.co.uk The HeelanHub Podcast, a show for small business owners.
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#accounting #tax #limitedcompany
great content, thanks. im interested to know your top 5 books, both work related and personal. maybe a next video idea (unless youve done one already and ive missed it) keep up the great work
Will add to the list Shaun! Glad you enjoy.
Thank you.
You're welcome!
Thank you
Hope it helped!
Great video. Can you please do a video about investing profits into shares. I’ve read, it’s best to set up a separate company and issue a loan to that new entity from the trading company. Any thoughts would be great for the community.
Glad you enjoyed the video! Because of professional regulations we have to avoid investment style content I’m afraid!
The strategy you describe is fairly common but there are various things that might make it not worth it in any given situation.
2:50 I had a self-employed friend who spent £10,000 on a new pc because, in his words, it was "tax deductible".
The way he phrased it made it sound like "it's free money!". I'm still not sure he understood that... he still spent that 10k, lol.
So so common sadly!
Presumably if my company has an n-year contract after which the company won't make any more income, and I also won't make other income for a while, it would be best to leave the money in the company and take it as a minimal salary over a number of years, thereby not incurring income tax and also keeping up NIC contributions? Can't think of a downside but also can't really see this discussed anywhere. Thanks!
This is one tactic that can used (there are a few). So much depends on your other income/situation/goals but that is physically possible
Interesting and informative video. I am debating setting up a limited company but wary to do so because it means I will end up having to pay my ex more in child maintenance (his salary for his day job is 3x mine, he doesn't need it)
Methinks I need to find an accountant to see if it's worth setting this up
Out of interest why do you think it will mean you need to pay more maintenance?
I always keep referring back to your videos, thanks! Do you have any guidance on investing through a limited company? I.e. as a contractor should I consider investing through my ltd or withdraw my cash and invest personally?
Glad you enjoy! No we don’t - investing is a difficult topic to cover as an accountant because it borders on regulated advice, given by financial advisors.
There are a few pitfalls to navigate with investing and limited companies.
Commonly though for any real level of investment, if it’s desired to have a company do this you often see a new one formed, and or made part of a small group.
When making investments personally the biggest barrier is often the extra tax on getting the money out of the company. But there are some benefits to personal ownership of some assets.
Difficult to explain in a comment!
Hello I need a suggestion for my assignment.I need to choose a company that might be in UK or other multinational that their annual net profit is declining in past few years so, which company is best to select can you help me
Not sure on this one sadly i'm afraid! Perhaps just out financial times for some bad news stories and locate accounts on companies house?
Very helpful video!
So if you have several hundred thousand in reserves, does that mean you could end up needing 5/6 different bank accounts all holding the max £85k to ensure those amounts of money are covered? I’m assuming there is another way of protecting those reserves as they grow as surely that starts to get less feasible especially as it’s limited to institutions rather than individual
Banks which just get more difficult to be fully protected?
In theory yes, but it all depends how concerned you are in reality of one of these banks failing.
As you'd imagine there are many many business with more than £85k in their banks!
I would place the money over several well known banks, but I trust nobody and like to minimise any losses
Thanks for the video Dan. Was wondering if you could help me out with a question, loosely related to the video topic: If I were to close my UK limited company, could I theoretically just use my business bank account money for every day spends? Sounds slightly dodgy, but maybe the most 'tax efficient' metric?
If you dissolve / strike off your limited company it’s bank account gets frozen, so you wouldn’t be able to do this.
Could you please make how can non residents take their money out fron their limited company?
That might be a little too much for a video but we will add to Dan’s list.
So, if I am not mistaken once I pay corporation tax on the profit in my LTD company for the current financial year that is it.
I won't be charged corporation tax on the profit brought forward from the previous financial year as essentially I already paid corporation tax on that amount?
That's essentially it. You pay tax on your profits in an accounting period once.
Can you do a video on what happens if you do nothing. How does HMRC know?
Do nothing in what sense? Do you mean file no accounts etc?
Anyone sensible would never leave more than £85,000 in any one bank, but multinationals with millions are unable to do that, but an SME can
I guess there is a lot of trust in the high street banks, along with the practicalities. If your business regularly pays say £50k+ to suppliers for example it’s impractical to only be keeping £85k in your main trading account.
Would there be any legal/regulatory issue if you left your directors salary and dividend in the business bank account after declaring it at year end and physically withdrew it in the following tax year? For example; you transferred out your directors salary and dividend in May 23 for your 22/23 accounts.
No that’s often common, providing relevant paperwork / record is in place, it can sits in your ‘directors loan account’ ready to draw when you want. (Check out our videos on the loan account).
If you invest into ISA directly from LTD bank account, would this offset Corp Tax? Or is it better to withdraw Dividends (below £50k) and invest from the personal account?
If you are investing in a personal ISA, you are just withdrawing funds from the company. Therefore no corp tax deduction, unless you are declaring as salary (but often not a tax win to do this).
@@HeelanAssociates is there something other than a personal isa like a corporate isa ?
If my limited company tax end is end of may 25 and I also have a full time job. Can I take out a portion of my dividends before April 25 to avoid paying the higher rate of dividends tax the following year?
You can decide when to declare and pay dividends so it’s often possible.
Hi, I am both employed and newly self employed.I am at 20% tax band but self employment will push me to 40%.I am late 50's and am facing no income when retiring early for about 4 years before 65.Can I let my profits sit in my Ltd company ( if I set one up) and draw that money at a lower rate when I have no income? (I'm untrustworthy of dumping it into a DC pension)
Hi yes this is often possible by not drawing the money and then paying dividend and or salary later in life.
Can a company director abbreviate their name on the register?
Even if you did, you would usually find practical problems in opening a bank account etc, as they do checks to Companies House.
I’m just wondering because I’m 17 looking to set up my ltd company to specialise in rent to rent deals. I got told from a agent I would actually need to be 18 for it to be possible, is there a way around that?
I'd imagine this is because of the legal age required to sign certain docs. It's not likely a tax issue, more a legal one.
16 to be a Director
You didn’t mention pension contributions as a means of extracting the funds in the company bank account before the year end and paying them to the owner Director(s) does this not provide the additional benefit of the contributions being tax deductible.
Hi, sure there are lots of things we didn't mention - only so much time! Paying employERS contributions on behalf of a director, if done correctly is certainly a great method of extracting funds, if (and this is the wider question) if makes sense to add to a pension pot.