Retained profits

[Joop123]

Hi guys/girls
If my company (ltd) is expecting profits after corp tax of say £120000 and myself and wife take the max out before we hit the 40% brackets (£80k)..what would be a wise route to take with the excess ? Any investment gurus out there
many thanks
Joop

 

[cws accounting]

It depends what you are trying to achieve. Do you want to extract it from the business now, or are you ok to leave it in and take it out at a later date?

 

[DarrenTSO]

Speak to your accountants and get some thorough advice, but personally I'd be looking at pension contributions if you don't need that money in the very near future.

 

[Joop123]

Thanks for the reply, spoke to my accountant and he just simply surgested to invest the excess in a savings account in the company name.He's a lovely guy but very old fashioned and near retirement. I was wondering if there was any better way of maximising this excess that I could research, the pension idea seems possible (is there tax benefits ?).
Also is there anymore ways to extract it without encrouching into the dreaded 40% ?
Any more ideas would be greatly received.

 

[DickM]

Hi guys/girls
If my company (ltd) is expecting profits after corp tax of say £120000 and myself and wife take the max out before we hit the 40% brackets (£80k)..what would be a wise route to take with the excess ? Any investment gurus out there
many thanks
Joop

Below HMRC pension info could help you, although it appears that "the taxman" has wised up to this! with a reduction in Private Pension annual contributions tax free allowance of nearly £200K in two years! - ref. link:

http://www.hmrc.gov.uk/incometax/relief-pension.htm#1

Limits on tax relief
You can save as much as you like into any number and type of registered pension schemes and get tax relief on contributions of up to 100 per cent of your earnings (salary and other earned income) each year, provided you paid the contribution before age 75. But the amount you save each year toward a pension from which you benefit from tax relief is subject to an 'annual allowance'. The annual allowance amounts for the current and previous two tax years are shown below.

Limits on tax relief - annual allowance amount
Tax year Annual allowance 2011-12 £50,000
2010-11 £255,000
2009-10 £245,000

Of course, pension income is not tax free
but at least the rate currently starts @ 20%, and that's after the annual PAYE tax free basic income allowance of £9,940

 

[Joop123]

thanks for the additional information, I'm thinking that I might look around for a financial advisor.
If I was to start another ltd business with another partner what would the best way forward be regarding shares...the problem I have is that I dont need to pull a wage or money out of the new one but my business partner will (sister !). If we are both directors and she pays herself a dividend ...would I then need to take the same ( assuming we have 50 / 50 ) ??
I had heard that some people in same situations put the company shares in their childs name ?

Joop

 

[Anna Chandley]

thanks for the additional information, I'm thinking that I might look around for a financial advisor.
If I was to start another ltd business with another partner what would the best way forward be regarding shares...the problem I have is that I dont need to pull a wage or money out of the new one but my business partner will (sister !). If we are both directors and she pays herself a dividend ...would I then need to take the same ( assuming we have 50 / 50 ) ??
I had heard that some people in same situations put the company shares in their childs name ?

Joop

Your current company could own the shares in the new company. The current company could receive the same dividend as your sister but would not pay corporation tax on the dividends. You of course would still need to extract these dividends from your current company but can control the timing to minimise tax.