Best short term investment...

rodwales

I have just switched to being self employed with a guaranteed income every month. I am billing myself out at £2750 per month.

My accountant advises me that my first tax payment isnt due until January 2012 and that I should put away £750 per month to cover it.

So......what is the best use of £750 a month over the next 16 months????

Thanks for your help.

xrjtg

Are you working as a sole trader or through a limited company? In either case the answer is likely to be either stick the money in the highest paying savings account you can find, or pay your tax early, but the details could vary.

Cautious_Investor_3

Hi

I'd agree, put the money in a deposit account, you really should not consider any equity investments for such a short time frame.

If you are trading on a self employed basis you can use a personal account such as those listed here:

http://www.!!!!!!.uk/free-services/best-buy-savings-accounts/regular-saver/

If you are trading as a limited company take a look at these accounts:

http://www.!!!!!!.uk/free-services/best-buy-savings-accounts/business-deposit-accounts/

I hope this helps.

The Cautious Investor

rodwales

Im a sole trader.

Is there any advantage to paying tax early?

xrjtg

You get paid a nominal rate of interest on the overpayments, and it stops you spending the money on anything else. I had a quick look for the rate, but things like "tax overpayments interest" tend to come up with results looking at the issue from the opposite angle!

dunstonh

Going OT.... Many new self employed dont realise this but the self employed get less state pensions than an employed person. So, don't forget to put money aside to cover that difference. In monetary terms today, the reduced state pensions are worth about £100,000 in a pension fund. So, effectively, the first £100k in your pension makes up for lost state pensions.

alanq

xrjtg wrote: »

You get paid a nominal rate of interest on the overpayments, and it stops you spending the money on anything else. I had a quick look for the rate, but things like "tax overpayments interest" tend to come up with results looking at the issue from the opposite angle!

If this is the same as a Certificate of Tax Deposit you get 0% unless for more than £100,000.
http://www.hmrc.gov.uk/howtopay/ctd-interest-rates.pdf

http://www.hmrc.gov.uk/payinghmrc/cert-tax-deposit.htm

Update:
0% for overpayments
http://www.1stcontact-accounting.com/news/post/HMRC-announces-no-interest-will-be-payable-on-tax-overpayments.aspx

Trix2

dunstonh wrote: »

Going OT.... Many new self employed dont realise this but the self employed get less state pensions than an employed person. So, don't forget to put money aside to cover that difference. In monetary terms today, the reduced state pensions are worth about £100,000 in a pension fund. So, effectively, the first £100k in your pension makes up for lost state pensions.

Sorry but by this do you mean the S2P - as if you pay your normal NI Class 2 and 4 payments you are still ok for the basic state pension. Or at least that is how I understood it.

dunstonh

Trix2 wrote: »

Sorry but by this do you mean the S2P - as if you pay your normal NI Class 2 and 4 payments you are still ok for the basic state pension. Or at least that is how I understood it.

That is correct. You get the basic state pension (£5000 currently) but no additional pension (SERPS as it was years ago or S2P as it is currently).