There are many strategies that you can employ to make the most of surplus cash in a business.

But, if you wanted to just live for the now, you could take the cash straight out of your business and suffer the tax cost.

If you have generated enough cash in the business and you’re currently sitting on a substantial amount of money with no real purpose or direction, this could be a good option.

For example, if you have a lifestyle business and there are things that you wish to spend your money on that benefit your lifestyle, you could consider taking the income and suffering the tax consequences.

However, if you’re planning to sell your business and you expect to benefit from Business Asset Disposal Relief (BADR, formerly known as “Entrepreneur’s Relief”), this option might not be the most tax-efficient.

Fortunately, there are other ways to minimise tax once you’ve taken your cash out. For example, you could invest the cash into personal pension contributions, or consider an Enterprise Investment Scheme (EIS) or Venture Capital Trusts (VCTs).

  • A lump sum of money in your personal bank account
  • Able to achieve what you want with the funds.
  • Likely to be higher Income Tax to pay
  • More decisions on what to spend the money on.

Of course, this strategy depends on your individual circumstances and your long-term plan. Make sure you receive financial advice before taking action.

Download your free guide

Withdrawing and paying tax is far from your only choice when dealing with surplus cash in your business.

Download your free guide to find out six other options for your surplus business cash.

If you’d like to find out more, please email or call 0113 262 1242 to speak to us at Cordiner Wealth.

Please note

Enterprise Initiative Schemes (EIS) and Venture Capital Trusts (VCT) are higher-risk investments. They are typically suitable for UK-resident taxpayers who are able to tolerate increased levels of risk and are looking to invest for five years or more. Historical or current yields should not be considered a reliable indicator of future returns as they cannot be guaranteed.

Share values and income generated by the investments could go down as well as up, and you may get back less than you originally invested. These investments are highly illiquid, which means investors could find it difficult to, or be unable to, realise their shares at a value that’s close to the value of the underlying assets.

Tax levels and reliefs could change and the availability of tax reliefs will depend on individual circumstances.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.