Better use of Ltd retained profit

BoneroGG

Hello all,

 

Hope this message will find you well.

I have a bit of cash retained in my ltd company from years when I have been contracting outside IR35.  I am now, like many like consultants, still contracting but through an umbrella company.

What are the possibilities of putting this cash to a better use, without taking it out of the Ltd and incur a dividend tax?

I thought about a couple of things:

1)      investing it in real estate by creating a Limited BTL company

2)      Contributing it toward my pension pot and grow it in a proper tax wrapper.

3)      Grow the cash (still within the ltd) by investing in stock and shares: currently, I just invested it in a riskless Money Market fund on where I am earning around 5% pa.  Can I buy stock & shares too with this cash?

Any advice, suggestion, or warnings and pros and cons of each option will be welcomed?

 

Many thanks

Marcon

BoneroGG said:

Hello all,

 

Hope this message will find you well.

I have a bit of cash retained in my ltd company from years when I have been contracting outside IR35.  I am now, like many like consultants, still contracting but through an umbrella company.

What are the possibilities of putting this cash to a better use, without taking it out of the Ltd and incur a dividend tax?

I thought about a couple of things:

1)      investing it in real estate by creating a Limited BTL company

2)      Contributing it toward my pension pot and grow it in a proper tax wrapper.

3)      Grow the cash (still within the ltd) by investing in stock and shares: currently, I just invested it in a riskless Money Market fund on where I am earning around 5% pa.  Can I buy stock & shares too with this cash?

Any advice, suggestion, or warnings and pros and cons of each option will be welcomed?

 

Many thanks

1. and 3. Start by checking your Articles to see what they permit - highly likely all the above will be options, and if not, you can always amend your Articles.

2. Hopefully you're already doing that, but nothing to stop you maximising your annual contributions by paying direct from your limited company.

Much depends on your objectives. Taking action just to avoid paying tax doesn't always tally with other things you're trying to achieve (eg tying up cash in a pension for many years, if you're still relatively young, may not be a great idea if you have a mortgage to pay and a growing family to support). Having a large pile of cash sitting doing nothing within your company isn't ideal, so ensuring it is at least invested in the highest interest account you can find while you ponder your options would be no bad idea.