Invest company profits or take them out and invest personally?

4Winds

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I own a small company that is generating a profit. I want to invest this money to grow wealth. I also have a paye job and am on top rate of tax already. I already have a directors pension set up.

My question is whether option a) or b) is a better idea

(a) retain the money in the company and invest as a company ( e.g. spend 100000 to buy forestry or shares). I am essentially building wealth of company which I can extract at a later date, possibly when I am not on top rate of tax.

(b) take paye income and invest the post tax money in shares/ other investment

Thanks in advance for your feedback.
 
Of the 2, I'd go option b.

What about:
(C) company contributes to a pension. Growth tax free within fund, and generally speaking once you're not employed by that company when you reach 55 you can access the pension.

Re: option a
It's usually a bad idea to leave funds within a company like this. The company pay's tax on undistributed profits, and capital gains / income tax on any return. You then pay tax when you eventually take the money out.

With forestery, returns are tax free so you might as well invest directly.

You mention 100k investment. Spend a few hundred quid on professional tax advice. It'll pay for itself multiple times with an investment that size!
 
Investing in forestry is a long term play, with no access to your funds. Not really suitable if you are putting all your profits into it. If you invest in funds, the tax is 25% as opposed to 41% for individuals. It is not deemed as undistributed profits either.

The problem is getting it into your own hands at the end. It's the company's money, not yours. To get it out, you'll have to pay tax on it.

There's no magic way of growing money in a company (gross income really) and getting it into your hands without making a contribution to the tax man. A directors pension is probably the easiest way.


Steven
www.bluewaterfp.ie
 
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