Small Businesses - Advice for saving for both Personal and Corporation Tax

goonieKing

Hi everyone,

I recently set up a small business, and I need to set aside money each month so that when I'm due to pay tax, I can use these funds.

Please could you advise on a Savings account that would be best suited for this?

I'll likely be transferring £300-400 into this Savings account each month, and then withdrawing to pay tax when it is due.

As I'll need to save like this each year going forward, is it best to keep switching accounts for better interest rates, or just to settle with one?

The Marcus by Goldman Sachs savings account sounds suitable, but there are so many others.

Would really appreciate your advice.

All the best,

Prism

Are you a limited company with a business bank account, or self employed using a regular account?

I use Aldermore for business and started using Marcus for personal

eskbanker

I'd suggest keeping your personal and company finances entirely separate, and only using business accounts for the latter.

So, for personal tax, you could indeed use a personal Marcus account to put aside the relevant chunk of income once taken out of the company, although a regular saver account might pay better if you want to do this every month.

However, for corporation tax, this is company money that should be retained in the company's name in a business account.

robber2

You really need to keep the two pots seperate. Remember that the company money you set aside for Corporation tax is NOT yours, its a COMPANY asset!


Rob

eskbanker

robber2 wrote: »

You really need to keep the two pots seperate. Remember that the company money you set aside for Corporation tax is yours, its a COMPANY asset!

You've omitted a rather important word from "the company money you set aside for Corporation tax is NOT yours, its a COMPANY asset!"!

Prism

Also the OP didn't say they had a limited company, although the post does say corporation tax in the heading.

You can do some interesting stuff with director loans and personal savings accounts but its too much messing around for my liking

dunstonh

I recently set up a small business, and I need to set aside money each month so that when I'm due to pay tax, I can use these funds.

Is this for your personal tax provison? If so, then a normal savings account is fine.

If it is for your corporation tax bill, then a company savings account.

Whilst there is no legal requirement for a limited company to have its own bank account, it is daft not to. If you mix and match your personal banking with your limited company banking then your accountant is going to charge you more and you leave yourself open to difficulty in an HMRC review.

eskbanker

dunstonh wrote: »

Whilst there is no legal requirement for a limited company to have its own bank account, it is daft not to. If you mix and match your personal banking with your limited company banking then your accountant is going to charge you more and you leave yourself open to difficulty in an HMRC review.

Even if there's no legal requirement as such, it's often highlighted on here that the Ts & Cs of personal current accounts typically include a clause expressly prohibiting use for business purposes (to the extent that I don't recall anyone being able to cite one that doesn't specify this), and there have also been anecdotal references to personal accounts being (mis)used in this way being closed down....

kidmugsy

You'll need a company current account. For a company savings account we've wondered about this.
https://ccbank.co.uk/savings/95-day-notice-account-cambridge-counties-bank/

It's a pity that the minimum is so high.

stphnstevey

If you are an ltd and don't keep company funds separate, your accountant will likely class it as a Director's Loan and there are tax implications for not paying that back within timelines. You may also open yourself up as a target for HMRC investigation

mxo

Virgin money also have some decent business savings accounts. It’s worth shopping around.

If you need access to the cash for paying tax, check the notice period on the account - you don’t want to find out the day before the deadline that you can’t withdraw the money.