Business saving account
Discussion
So I am still very green to running my own business so hopefully someone will have some experience of this.,,.
Business savings accounts are significantly higher interest rates compared to cash ISA’s, so can I loan the business money and throw it into a business savings account and pay it back (to myself-repay the loan) when I want, leaving the interest in the business, to take advantage of the higher interest rates?
I understand there’s is risk if there was issues with the business, but is there any reason I can’t do it or need to think about?
Business savings accounts are significantly higher interest rates compared to cash ISA’s, so can I loan the business money and throw it into a business savings account and pay it back (to myself-repay the loan) when I want, leaving the interest in the business, to take advantage of the higher interest rates?
I understand there’s is risk if there was issues with the business, but is there any reason I can’t do it or need to think about?
Presumably getting the interest income to yourself for spending would incurs some taxation if it was earned in your company?
ISA tax free, if. It exhausted ISA allowance I’d stick it there, you can get best part of 4% tax free.
Interestingly my bank offers ISA at 3.85% & business 95day notice at 3.25, (not a limited co, but I had swithered doing it the other way in the past !!). But decided for a couple of hundred £ it wasn’t worth the hassle
ISA tax free, if. It exhausted ISA allowance I’d stick it there, you can get best part of 4% tax free.
Interestingly my bank offers ISA at 3.85% & business 95day notice at 3.25, (not a limited co, but I had swithered doing it the other way in the past !!). But decided for a couple of hundred £ it wasn’t worth the hassle
Have you looked at Flagstone or similar?
I have a business account with an average interest rate of 3.66% and a personal account with an average rate of 4.06%.- both with quite a lot deposited however spread so I’m covered by FSCS
MY deposits are also instant access for various reasons and having a quick look on the portal longer deposit terms will get you a 4.25% rate currently.
I would suggest if you deposit money via the company you may well end up paying CT on any interest but I can’t confirm for sure.
I have a business account with an average interest rate of 3.66% and a personal account with an average rate of 4.06%.- both with quite a lot deposited however spread so I’m covered by FSCS
MY deposits are also instant access for various reasons and having a quick look on the portal longer deposit terms will get you a 4.25% rate currently.
I would suggest if you deposit money via the company you may well end up paying CT on any interest but I can’t confirm for sure.
Silverage said:
Do you pay the company some interest on the director's loan when you pay it back?
You should, or include it as a benefit in kind.I don't know the posters circumstances, but it isn't really possible to do this (for most people) for more than one year due to the rules below:
https://www.gov.uk/hmrc-internal-manuals/company-t...
MaxFromage said:
Silverage said:
Do you pay the company some interest on the director's loan when you pay it back?
You should, or include it as a benefit in kind.I don't know the posters circumstances, but it isn't really possible to do this (for most people) for more than one year due to the rules below:
https://www.gov.uk/hmrc-internal-manuals/company-t...
MaxFromage said:
Silverage said:
Do you pay the company some interest on the director's loan when you pay it back?
You should, or include it as a benefit in kind.I don't know the posters circumstances, but it isn't really possible to do this (for most people) for more than one year due to the rules below:
https://www.gov.uk/hmrc-internal-manuals/company-t...
Maybe BIK should be a thing but it’s never been questioned and accountants have never mentioned ‘bed and breakfasting’ on this.
AB said:
You'll pay CT on the interest earned if I'm not mistaken.
That’s right a minimum of 19%. I suppose you could engineer pension contributions and general income / expense balance to result in 0 profit so any interest wouldn’t result in a taxable profit.
I like to save a quid but even for me it seems like quite a lot of effort.
AB said:
It’s OK to have an outstanding loan account then pay it back.
Maybe BIK should be a thing but it’s never been questioned and accountants have never mentioned ‘bed and breakfasting’ on this.
It is ok to have one and pay it back as a one-off. But if it's recurring you'll more than likely be caught by the rules I noted. And you most definitely should be paying interest if the loan is over £5K. Remember you're the one liable if HMRC come knocking. Which does happen in these circumstances.Maybe BIK should be a thing but it’s never been questioned and accountants have never mentioned ‘bed and breakfasting’ on this.
I use Insignis, which is a pretty good platform cash around. I'm getting.around 4.1%. Yes it's subject to CT, but it's handy extra cash in the business and the interest compounds. It's not.to be sniffed at.
Also you can set up company SIPP. You can also.draw.out additional funds and put that in to VCTs etc with tax relief.
Hope this helps.
Also you can set up company SIPP. You can also.draw.out additional funds and put that in to VCTs etc with tax relief.
Hope this helps.
Thanks to everyone who shared there thoughts, pros and cons. I’m not sure I have quite enough tip the effort vs reward scale yet.
I am also quickly learning that those who brag about claiming big amounts on this and that likely either rolling the dice on not being caught or a telling fibs.
I am also quickly learning that those who brag about claiming big amounts on this and that likely either rolling the dice on not being caught or a telling fibs.
Reading through this, I’m surprised no one mentions the corporate investment route. I haven’t actually done it yet, but I’m in the process of setting up a corporate account (AJ Bell type thing) so I can move reserves into a sterling money market fund. They’re paying around 5% at the moment, with daily access, and it’s basically what councils and larger corporates do with their cash.
From what I can see, it’s the same tax treatment as interest in a business account, but without the faff of chasing half a percent here or there across different banks. I suppose it’s not on most people’s radar because small businesses rarely have that much cash sitting around, but once you do, the difference starts to add up.
Just seems odd it never gets talked about, when it looks like the default option for institutions managing liquidity.
From what I can see, it’s the same tax treatment as interest in a business account, but without the faff of chasing half a percent here or there across different banks. I suppose it’s not on most people’s radar because small businesses rarely have that much cash sitting around, but once you do, the difference starts to add up.
Just seems odd it never gets talked about, when it looks like the default option for institutions managing liquidity.
AB said:
You'll pay CT on the interest earned if I'm not mistaken.
I do the opposite, pile company money in to my own savings account and them pay back the outstanding Director's Loan.
I put mine in personal savings accounts, but not as a directors loan, its in "held in trust" or some such wording - I'm the only Director and shareholder so it's fine (if that matters?). This way I don't have to repay it 9 months after year end (or pay a shocking 33.5% tax if I don't! - the rules for a "Directors loan").I do the opposite, pile company money in to my own savings account and them pay back the outstanding Director's Loan.
The money is effectively still in the company, just managed by me, and I'm "trusted" to hold the money.
My accontant checks the interest and I pay CT on that.
Edited by Griffith4ever on Wednesday 3rd September 07:58
Griffith4ever said:
AB said:
You'll pay CT on the interest earned if I'm not mistaken.
I do the opposite, pile company money in to my own savings account and them pay back the outstanding Director's Loan.
I put mine in personal savings accounts, but not as a directors loan, its in "held in trust" or some such wording - I'm the only Director and shareholder so it's fine (if that matters?). This way I don't have to repay it 9 months after year end (or pay a shocking 33.5% tax if I don't! - the rules for a "Directors loan").I do the opposite, pile company money in to my own savings account and them pay back the outstanding Director's Loan.
The money is effectively still in the company, just managed by me, and I'm "trusted" to hold the money.
My accontant checks the interest and I pay CT on that.
Edited by Griffith4ever on Wednesday 3rd September 07:58
The other issue is risk. If that cash is sat in your personal account, it’s exposed. If you got divorced, went bankrupt, or worse, those funds could be treated as yours personally rather than the company’s. That’s why it’s so important to keep the separation clear.
Paying CT on the interest doesn’t “fix” it either because HMRC would still argue the principal sum is a director’s loan. In reality the only safe way is to keep company money in an account in the company’s name whether that’s a standard business savings account, or a corporate investment/money market fund.Then there’s no ambiguity: the company earns the interest, pays CT, and the money stays ring-fenced.
Looks like an easy workaround, but it’s a big compliance risk if you ever get scrutinised.
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