Why do business savings accounts get such rubbish interest?

[CIS121]

I get about 5.6% and that took some hunting. On my personal cash, I get 6.35. I've got far more in the business savings account as I would assume most people do and I would have thought that the banks would fight harder for business savings account than personal ones and hence give better rates.

[JustinP1]

Its competiton and market forces.

What you are getting is actually a good rate in comparision to a bunch of places.

Why do personal accounts offer better rates? Because personal savers are more likely to move their money around to a different bank if they would gain more interest. Therefore there is more competition and to get customers they choose to offer a better rate.

With business accounts they weight up the much smaller chance that a business owner will want to change banks with the fact that they are getting a good margin themselves on the lower rate.

[W4NTED]

Who's giving 5.xx??

[djmotorsport]

Alliance & Leicester - 5.5%

[emicen]

I think it also had something to do with businesses not really saving if you know what I mean.

For example, I keep a bit of a cash reserve for eventualities. But if I was to need something for the business representing a big capital expense, I wouldnt treat it like I do in my personal life and save up, I'd take the hit and arrange finance through a loan as waiting isnt that likely to be an option.

Just thinking out loud, also I agree with the above, its a lot more hassle to move your business account for a few percent extra than your personal account.

Think some of the guys I contract with stick their corp tax etc in their offset mortgages whilst waiting for the due date. Beats most savings rates.

[CIS121]

emicen said:

Think some of the guys I contract with stick their corp tax etc in their offset mortgages whilst waiting for the due date. Beats most savings rates.

Doesn't this have tax implications as you're effectively getting a Director's loan?

[David_s]

CIS121 said:

emicen said:

Think some of the guys I contract with stick their corp tax etc in their offset mortgages whilst waiting for the due date. Beats most savings rates.

Doesn't this have tax implications as you're effectively getting a Director's loan?

My accountant is only interested in the directors loan account balances at year end when the accounts are compiled. Typically, we take loan repayments in lieu of salary and dividend throughout the financial year then vote a large dividend at the end of the year which is paid back to the loan accounts putting them back into balance. The loan accounts show money owed by the directors to the company for a large part of the year but the situation is reversed before the company accounts are compiled, and there has never been any tax implications.

[edb49]

David_s said:

CIS121 said:

emicen said:

Think some of the guys I contract with stick their corp tax etc in their offset mortgages whilst waiting for the due date. Beats most savings rates.

Doesn't this have tax implications as you're effectively getting a Director's loan?

My accountant is only interested in the directors loan account balances at year end when the accounts are compiled. Typically, we take loan repayments in lieu of salary and dividend throughout the financial year then vote a large dividend at the end of the year which is paid back to the loan accounts putting them back into balance. The loan accounts show money owed by the directors to the company for a large part of the year but the situation is reversed before the company accounts are compiled, and there has never been any tax implications.

That's not the correct (or legal) way of doing it - if the company loans you money throughout the year then it is a taxable benefit, regardless of the end of year situation. You can pay dividends monthly, just a bit more paperwork.

[emicen]

edb49 said:

David_s said:

CIS121 said:

emicen said:

Think some of the guys I contract with stick their corp tax etc in their offset mortgages whilst waiting for the due date. Beats most savings rates.

Doesn't this have tax implications as you're effectively getting a Director's loan?

My accountant is only interested in the directors loan account balances at year end when the accounts are compiled. Typically, we take loan repayments in lieu of salary and dividend throughout the financial year then vote a large dividend at the end of the year which is paid back to the loan accounts putting them back into balance. The loan accounts show money owed by the directors to the company for a large part of the year but the situation is reversed before the company accounts are compiled, and there has never been any tax implications.

That's not the correct (or legal) way of doing it - if the company loans you money throughout the year then it is a taxable benefit, regardless of the end of year situation. You can pay dividends monthly, just a bit more paperwork.

I pay my dividends monthly, what extra paperwork?

Using your corp tax slush fund as offset for your mortgage should be taxed as a BIK but I'm pretty sure most deal with that if/when they get caught at it.

[David_s]

emicen said:

edb49 said:

David_s said:

CIS121 said:

emicen said:

Think some of the guys I contract with stick their corp tax etc in their offset mortgages whilst waiting for the due date. Beats most savings rates.

Doesn't this have tax implications as you're effectively getting a Director's loan?

My accountant is only interested in the directors loan account balances at year end when the accounts are compiled. Typically, we take loan repayments in lieu of salary and dividend throughout the financial year then vote a large dividend at the end of the year which is paid back to the loan accounts putting them back into balance. The loan accounts show money owed by the directors to the company for a large part of the year but the situation is reversed before the company accounts are compiled, and there has never been any tax implications.

That's not the correct (or legal) way of doing it - if the company loans you money throughout the year then it is a taxable benefit, regardless of the end of year situation. You can pay dividends monthly, just a bit more paperwork.

I pay my dividends monthly, what extra paperwork?

Using your corp tax slush fund as offset for your mortgage should be taxed as a BIK but I'm pretty sure most deal with that if/when they get caught at it.

We used to issue monthly dividends, we 'had' to have a board meeting each month to approve the dividend then issue the relevant vouchers. It was further complicated in our case because our financial year runs Jan-Dec, not April-April, so a fair bit of paperwork. Our accountant recommended a switch to monthly loan repayments and top the accounts up at our financial year end by issuing a single dividend, the comments regarding temporary, negative loan balances throughout the year came from him.