Business saving account

[M22s]

So I am still very green to running my own business so hopefully someone will have some experience of this.,,.

Business savings accounts are significantly higher interest rates compared to cash ISA’s, so can I loan the business money and throw it into a business savings account and pay it back (to myself-repay the loan) when I want, leaving the interest in the business, to take advantage of the higher interest rates?

I understand there’s is risk if there was issues with the business, but is there any reason I can’t do it or need to think about?

[bearman68]

Very interested in a response to this, as I have a similar 'nice' problem.

Virgin money seem to be offering 3.55%
Allica are offering 4.08%
Tide are offering 4%, but tide need online connection to a small number of banking apps, and mine wasn't one of them, so I couldn't use it.

[AndyAudi]

Presumably getting the interest income to yourself for spending would incurs some taxation if it was earned in your company?

ISA tax free, if. It exhausted ISA allowance I’d stick it there, you can get best part of 4% tax free.

Interestingly my bank offers ISA at 3.85% & business 95day notice at 3.25, (not a limited co, but I had swithered doing it the other way in the past !!). But decided for a couple of hundred £ it wasn’t worth the hassle

[HoHoHo]

Have you looked at Flagstone or similar?

I have a business account with an average interest rate of 3.66% and a personal account with an average rate of 4.06%.- both with quite a lot deposited however spread so I’m covered by FSCS

MY deposits are also instant access for various reasons and having a quick look on the portal longer deposit terms will get you a 4.25% rate currently.

I would suggest if you deposit money via the company you may well end up paying CT on any interest but I can’t confirm for sure.

[Al Gorithum]

I have Alica, Flagstone and Tide. Currently Alica is best at 4.08% (with boosts).

[AB]

You'll pay CT on the interest earned if I'm not mistaken.

I do the opposite, pile company money in to my own savings account and them pay back the outstanding Director's Loan.

[MaxFromage]

Comparing business vs isa rates, I don't see much difference. Factoring in taxation, you will be losing out.

[Silverage]

AB said:

You'll pay CT on the interest earned if I'm not mistaken.

I do the opposite, pile company money in to my own savings account and them pay back the outstanding Director's Loan.

Do you pay the company some interest on the director's loan when you pay it back?

[OllyAitch]

Directors and owners often do this through what’s called a director’s loan account (if you’re a limited company). It’s perfectly legal to put money in and take it out later, provided it’s recorded properly in the books

[MaxFromage]

Silverage said:

Do you pay the company some interest on the director's loan when you pay it back?

You should, or include it as a benefit in kind.

I don't know the posters circumstances, but it isn't really possible to do this (for most people) for more than one year due to the rules below:

https://www.gov.uk/hmrc-internal-manuals/company-t...

[MustangGT]

MaxFromage said:

Silverage said:

Do you pay the company some interest on the director's loan when you pay it back?

You should, or include it as a benefit in kind.

I don't know the posters circumstances, but it isn't really possible to do this (for most people) for more than one year due to the rules below:

https://www.gov.uk/hmrc-internal-manuals/company-t...

I'm reading this as the other way round. I think the OP wants to loan money to the company to take advantage of the higher interest rates available to the business.

[MaxFromage]

MustangGT said:

I'm reading this as the other way round. I think the OP wants to loan money to the company to take advantage of the higher interest rates available to the business.

OllyAitch was referencing AB, who is borrowing money from the company.

[AB]

MaxFromage said:

Silverage said:

Do you pay the company some interest on the director's loan when you pay it back?

You should, or include it as a benefit in kind.

I don't know the posters circumstances, but it isn't really possible to do this (for most people) for more than one year due to the rules below:

https://www.gov.uk/hmrc-internal-manuals/company-t...

It’s OK to have an outstanding loan account then pay it back.

Maybe BIK should be a thing but it’s never been questioned and accountants have never mentioned ‘bed and breakfasting’ on this.

[trickywoo]

AB said:

You'll pay CT on the interest earned if I'm not mistaken.

That’s right a minimum of 19%.

I suppose you could engineer pension contributions and general income / expense balance to result in 0 profit so any interest wouldn’t result in a taxable profit.

I like to save a quid but even for me it seems like quite a lot of effort.

[MaxFromage]

AB said:

It’s OK to have an outstanding loan account then pay it back.

Maybe BIK should be a thing but it’s never been questioned and accountants have never mentioned ‘bed and breakfasting’ on this.

It is ok to have one and pay it back as a one-off. But if it's recurring you'll more than likely be caught by the rules I noted. And you most definitely should be paying interest if the loan is over £5K. Remember you're the one liable if HMRC come knocking. Which does happen in these circumstances.

[WinkleHoff]

I use Insignis, which is a pretty good platform cash around. I'm getting.around 4.1%. Yes it's subject to CT, but it's handy extra cash in the business and the interest compounds. It's not.to be sniffed at.

Also you can set up company SIPP. You can also.draw.out additional funds and put that in to VCTs etc with tax relief.

Hope this helps.