Investing through your company can be successful, provided you get it right.

If you have enough cash in the business and you’re comfortable with the expected cashflow, it makes sense in some circumstances to invest the cash.

In most cases, the profits from the investments will be taxed at Corporation Tax rates – 19% in 2021/22 – which is fairly competitive, particularly for income-generating assets.

Two issues with this could be liquidity and risk. If you’re looking for access to this capital in the short term, this is unlikely to be a strong option.

Also, deciding what to invest in and what risk to take is also a decision that many struggle with. This is where a financial planner can add value, providing advice on the right investments for you.

Pros
  • Potential investment growth or income to boost your sum
  • Favourable tax rate within the company for income-generating assets.
Cons
  • Capital at risk and decisions over what to invest in
  • Liquidity can be an issue, as capital may be inaccessible.

 

Realistically, the risk and investment decisions should reflect the business plan. The general assumption for traditional investments is that the longer the time horizon, the more risk you can take on – of course, that depends on what “longer” means to you, but likely a minimum of five years.

You should also look at the structure of holding the investments and potential implications. You should speak to your accountant as this is quite a complex area, so make sure you understand the tax and investment risks before deciding on this approach.

Find out more

If you’d like to find out what else you could do with your surplus business cash, you could benefit from reading this handy guide.

Download your free guide right here to read six other strategies for dealing with surplus business cash.

Alternatively, email hello@cordinerwealth.co.uk or call 0113 262 1242 to speak to an experienced financial adviser.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial 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.