what do MD`s do with ltd companies that have £250k+ in bank

[hillcrest]

My ltd company has a few hundred thousand in savings that it doesn`t need. What do people do with large sums in ltd companies that won`t be needed in the near future?

[Iain328]

hillcrest said:

My ltd company has a few hundred thousand in savings that it doesn`t need. What do people do with large sums in ltd companies that won`t be needed in the near future?

Pay a dividend!

[Mattt]

Expand?

[hillcrest]

can easily live off £40k a year out of the company. So paying almost no tax on drawings

[hillcrest]

Mattt said:

Expand?

can`t be bothered with more properties/ employees or headaches

[mybrainhurts]

Drawings..? Not a company, then...?

[anonymous-user]

what do you want to do with it? if you have an objective, there is surely a way

[hillcrest]

mybrainhurts said:

Drawings..? Not a company, then...?

yeah sorry ltd company, I take about £32k a year dividends plus £8k wages

[mybrainhurts]

We used to place a couple of million on overnight/week/month deposit, but that was a long time ago and the clearing banks used to have to pay substantial rates if they had to attract immediate short term funds.

Don't know if things have changed since the 80s....

[Fatman2]

pioneer said:

hillcrest said:

mybrainhurts said:

Drawings..? Not a company, then...?

yeah sorry ltd company, I take about £32k a year dividends plus £8k wages

How do you get away with £8k salary? Wouldn't have thought the tax man would like that at all?

The tax man might not like it but is perfectly legal. Besides the OP will be paying corporation tax on the £32k so the tax man is still getting paid (and I'm assuming the VAT man does ok out of it too)

Funnily enough I was going to say the complete opposite actually and ask why the basic was so high

Seriously though is there a partiular reason you're paying yourself an £8k salary ?

Sorry I can't give you any suggestions for the £250k

[northandy]

hillcrest said:

My ltd company has a few hundred thousand in savings that it doesn`t need. What do people do with large sums in ltd companies that won`t be needed in the near future?

Put it on deposit, your bank should have something.

[Ungarsee]

Treasury / money market rates are utter pants now. For a good few million you'll be lucky to get near 1% for 12 months and overnight / one week / one month you'll be extremely lucky to get near 0.5% (figures based on the bank I work for but as far as I know that's the case across the industry).

If you really don't need it for the forseeable you need to speak to a Financial Adviser trained in Corporate investments. There's plenty of options around at the mo. As an example the AXA Evolution Bond has been popular with some of my Corporate Clients (I'm not a financial adviser but I refer my clients to one). There's many many other options so find a reputable adviser if you don't have one already.

[anonymous-user]

2-3% is easily achievable with the right bank (we do exist) for 90 days to 12 months.

Most banks pay next to nothing on company, llp, or pension funds simply because they can!

We have taken in a huge amount of funds for our private clients who have business funds.

If you have no plans for the funds, plenty of investment options available to help you try to achieve a return above inflation.

P

[Eric Mc]

Fatman2 said:

pioneer said:

hillcrest said:

mybrainhurts said:

Drawings..? Not a company, then...?

yeah sorry ltd company, I take about £32k a year dividends plus £8k wages

How do you get away with £8k salary? Wouldn't have thought the tax man would like that at all?

The tax man might not like it but is perfectly legal. Besides the OP will be paying corporation tax on the £32k so the tax man is still getting paid (and I'm assuming the VAT man does ok out of it too)

Funnily enough I was going to say the complete opposite actually and ask why the basic was so high

Seriously though is there a partiular reason you're paying yourself an £8k salary ?

Sorry I can't give you any suggestions for the £250k

Paying a salary up to £12,000 can be more tax efficient than just paying a minimum salary up to the NI threshold. Up to around £12,000, a company will pay a combined total of Income Tax, NI and Corporation Tax which is actually less than just paying a salary of around £5,700, no PAYE and NI and Corporation Tax only.
This will also ensure that the director is pmaking contributions tto his state pension history.

[sumo69]

Eric

I am not sure how you get to that conclusion - the employers NI must make paying £12k as against £5700 more expensive surely?

Perhaps you can show your calculations?

David

[Eric Mc]

sumo69 said:

Eric

I am not sure how you get to that conclusion - the employers NI must make paying £12k as against £5700 more expensive surely?

Perhaps you can show your calculations?

David

I did run an exercise a while ago although there have been some tax changes since. Corpotration Tax is changing again in April 2011 so the calculations will change yet again. Whether there are tax savings or not is also dependent on the Tax Code or Personal Income tax allowances available to the director.

[hillcrest]

Just worked it out on my last payslip and my accountant makes me pay myself just over £9k a year. (don`t know why that exact sum.) The rest I take in dividends, upto approx another £30k. So around £39k a year. Which I the don`t pay hardly any personal tax on due to the corporation tax bill.

[sumo69]

You can have up to £43.5k gross dividend (ie just under 40k of cash) and not pay a penny of personal tax.

David

[Fatman2]

Eric Mc said:

Fatman2 said:

pioneer said:

hillcrest said:

mybrainhurts said:

Drawings..? Not a company, then...?

yeah sorry ltd company, I take about £32k a year dividends plus £8k wages

How do you get away with £8k salary? Wouldn't have thought the tax man would like that at all?

The tax man might not like it but is perfectly legal. Besides the OP will be paying corporation tax on the £32k so the tax man is still getting paid (and I'm assuming the VAT man does ok out of it too)

Funnily enough I was going to say the complete opposite actually and ask why the basic was so high

Seriously though is there a partiular reason you're paying yourself an £8k salary ?

Sorry I can't give you any suggestions for the £250k

Paying a salary up to £12,000 can be more tax efficient than just paying a minimum salary up to the NI threshold. Up to around £12,000, a company will pay a combined total of Income Tax, NI and Corporation Tax which is actually less than just paying a salary of around £5,700, no PAYE and NI and Corporation Tax only.
This will also ensure that the director is pmaking contributions tto his state pension history.

Many thanks for the feedback Eric

That is interesting as I was wondering about the NI/state pension thing. It is quite common in my circles for the standard £110 director fee + dividend and am wondering if doing as you've suggested is actually a more effective long term solution. It was something I was quite happy to do but my accountant was very much pro £110/w. In truth I've just gone along with it to date as I'm not sure there'll be much of a state pension when I retire but guess it's always going to be difficult to second guess these things.

Perhaps I should revisit the issue and get them to crunch some numbers for me.

Many thanks for the alternative angle on things

[robsti]

sumo69 said:

You can have up to £43.5k gross dividend (ie just under 40k of cash) and not pay a penny of personal tax.

David

I thought you payed tax on dividends and no NI?