Earnings Interest via Limited Company 14 November 2022 at 10:38AM in Cutting tax 2 replies 82 views

flat_white_

Hi all, just a silly question here to check if i am entirely out of the wack on this.

Given interest rates have risen, interest income has become more substantial, i thought it would be a good idea to incorporate in a limited company and save money via the company account. the structure will be to set up a LTD with say minimal equity, I loan money to the company who will then put into company savings account to earn interest, and then distribute the interest at a more tax efficient way.

There may also be benefits that come with it, i.e. EV company car credit etc.

Is this entirely legit? or would there be a concern for the company's intention to incorporate? fully aware of the cost that may come with (accountants etc etc). 

Jeremy535897

If you form a limited company that just holds money, it probably won't be able to claim any sort of expenses or capital allowances, because it doesn't trade, and it is not really an investment company. It will pay corporation tax on the interest, and you will pay dividend tax when taking any money out beyond the repayment of the loan. I doubt it makes sense, but you should take proper advice if the amounts are substantial.

eskbanker

flat_white_ said:

the structure will be to set up a LTD with say minimal equity, I loan money to the company who will then put into company savings account to earn interest, and then distribute the interest at a more tax efficient way.

What specific more tax efficient way(s) do you have in mind?  The proposition sounds very convoluted - are you sure you've made full use of all the more conventional methods of personal tax planning, in terms of pensions, ISAs, etc?