Invest as an individual or as a company (PIC, LTC)

ChilliBob

I appreciate this is someone getting well (considerably so!) ahead of themselves when they've not decided their risk appetite, asset allocation, fund selection or indeed anything, however, something that's been in the back of my mind for some time, as I seem to recall reading it a few years back, is whether:
a. People invest just as an individual
b. Invest via a company they set up and own
Obviously if you don't have much and just put it all in an ISA etc you'd go down route A, but if someone had a sizable pot, would they go down route B?

As far as I can tell route B would mean the admin burden of owning and filing the necessary paperwork, and further complications, but would also mean you're taxed different as you're taxed as a company and not an individual. Something with b. doesn't really seem to add up though - is it even allowed/possible? - As on the face of it it feels like a pretty obvious tax dodge!

Malthusian

If something seems like an obvious tax dodge then it's probably not. HMRC and the Treasury would have got there first :-)

Companies have to pay corporation tax on income and gains and then on top of that you have to pay personal taxes anyway to get the money out.

If you were very, very rich then you might invest via your own company (and multinational tax strategies would probably be coming into play) but not for us hoi polloi operating entirely within the UK tax system, to whom this forum caters.

Thrugelmir

Majority of people will first use the benefits of investing within a pension wrapper. Unless your Rothchilds then you can create your investment company such as RIT or Caledonia which is the Cayzer family. 

ChilliBob

I suspected that might be the case! I just know people do use companies for purposes other than 'running a business' in some cases - e.g. some contractors exist as a company. I know that's a whole other kettle of fish though and something constantly changing (and I believe a lot less favourable than it was, if at all now).
I'd be interested in your definition of very, very rich though, I guess it's such a relative term to the world and life each of us live in! very very rich in my eyes = £300mn or something!  (bear in mind below this level is 'very rich' and 'rich' lol)

ChilliBob

Thrugelmir said:

Majority of people will first use the benefits of investing within a pension wrapper. Unless your Rothchilds then you can create your investment company such as RIT or Caledonia which is the Cayzer family. 

Also on my 'to fathom out properly' list. All I know right now is £40k, previous years can come into it, and SIPP. But hey that's more than I knew about 3 months ago, when I was just maxing out my employer contribution by doing 10% of mine into my Scottish Widows pension!

Thrugelmir

Calendonia is capitalised at around £1.9 billion. Family controls over 40%, That's something north of £750 million. Won't be their only assets either. 

ChilliBob

Thank you James, that all makes sense. I certainly don't fall into the very very rich, very rich, or probably rich so certainly not a plan for me I think.

I interesting none the less, I know family holding companies are popular with very very rich families. Not to sure how trusts fit into this, I suspect they're an entirely different beast! 

AnotherJoe

ChilliBob, if you need to ask, its not for you.

ChilliBob

AnotherJoe said:

ChilliBob, if you need to ask, its not for you.

Ouch! But yeah you're probably right! 

Prism

One of the benefits in running a limited company for business, contracting or investing is controlling how and when you pay your taxes. When you invest as an individual you need to pay the taxes in the year you earn them. When dealing with large investments (several million) then maybe the control of a limited company is worth it.

bermudianmark

There are costs associated with running a company, producting accounts, accountancy fees etc and if your investment sum is modest these may well wipe out any benefit.

As others have mentioned a SIPP pension is a great option, you get tax relief on the money you invest, its tax efficient and able to make gains tax free, and you can take 25% out tax free after 55.  Fees are very low and you can manage your investment online very easily.  There are many on the market such as the Hargreaves Lansdown one.