Interest on my business account

Jeems

I am director of my own limited company. I currently have a decent amount in there and thought it'd make sense if I could make some interest on it. I had a google, and a few banks offer pretty poor rates (1% or less normally).

The bank I'm with doesn't offer any business interest accounts so I'd need to open an account with another bank. They all seem pretty formal and long winded.

Is there anything stopping me from making a directors loan (interest free) to myself and putting £20k into a 123 account for example? As long as I pay it back in before corporation tax is due, its fine right?

mageliken

Thanks Jeems I've been wondering the same. I think the sum of the loan must be less than £10,000 so that it is not treated as a benefit in kind (source). Hopefully someone with experience can add to this?

I've been looking at Aldermore's range of business savings accounts which are certainly better than the .25% we get currently.

TheTracker

Don't do it for 10k+. I don't think it worth the potential Hmrc risk for £240 interest.

I keep business savings in a) notice, b) term accounts, c) p2p.

None are difficult to open - ID and maybe a visit to branch. I'm getting 1.8% with Al Rayan for 120d and 1.25% with Aldermore for 6 months (they do 1.9 for 12 months). I'm getting 10% with p2p. In all cases particularly p2p you need to be careful about understanding liquidity.

You can withdraw extra dividends and suffer additional tax (probably 25% in your case this year). That sounds high, but if you think your money is going to be business cash for 5 or 6 years in can be worth taking the hit so you can earn more in a balanced portfolio and/or fill your ISA if you weren't already doing so.

And in terms of cash flow pay yourself your whole years dividends as early as possible in the year, not at the end of the tax year.

Probably needless to say but top up pension as much as you can afford.

Jeems

Hi, thanks for your response and recommendations.
Just to clarify - with the savings accounts, will interest earned count towards your CT bill at the end of the year? Does the bank pay you net interest like a personal account, or gross, and you declare the amount yourself on your CT return?
Interesting re p2p, I didnt know you could lend money from a business. Do you just go through normal sites like Zopa?

TheTracker

You pay CT on any profit and savings interest comprises part of the revenue that may lead to your gross profit. That's a yes. Banks should pay it to your company gross. I think most p2p allows business investment but you'd have to check. I have business and personal p2p accounts.

Jeems

Brilliant response, many thanks. Will shop around for the best rates, seems the ones you recommended are pretty good though.

davide691

It is also possible to keep surplus cash in the company (not suffer an income tax hit on company divi) and invest it directly in stocks and shares through a company brokerage account