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How to Invest Through a Limited Company UK

Tobi Opeyemi Amure
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How to Invest Through a Limited Company UK

In a nutshell, to invest through a limited company in the UK, first, ensure your company’s Articles of Association permit investment activities. Next, consult a financial advisor or accountant to plan your investment strategy and to understand tax implications. Once you’ve received professional advice, you can proceed to open an investment account in the name of your limited company with a financial institution and begin investing following your strategy.

Do you have excess cash reserves or profits sitting idle in your UK limited company?

Investing this capital can generate additional income and revenue.

Follow this guide to become a savvy corporate investor and put your business money to work in the stock market.

This article was reviewed by Tobi Opeyemi Amure, an investing expert and writer at InvestopediaInvesting.com, and Trading.biz.

5 Steps to Start Investing Through a Limited Company

  1. Choose an investment platform or broker that offers business accounts.
  2. Open a corporate investment account and provide the required documents.
  3. Deposit spare funds not needed for daily operations.
  4. Select investments like stocks, funds, bonds, or property.
  5. Make your first investment and monitor your portfolio.

How to Invest Company Cash in 5 Simple Steps

Follow these steps to safely put your business capital to work:

1. Pick an Investment Platform or Broker

Choose a platform or broker that provides corporate investment accounts.

Top UK choices include:

  • eToro
  • Hargreaves Lansdown
  • IG
  • interactive investor

Check that the broker meets your specific needs.

2. Open a Business Investment Account

After picking a broker, open a corporate account. You’ll likely need to provide more details than individual investors.

For example, eToro requires:

  • Your company’s legal entity type and country of incorporation
  • A description of your business activities
  • Relevant documents for directors and shareholders
  • Your Memorandum and Articles of Association

Have this information ready when opening your account.

3. Deposit Funds You Can Afford to Invest

Next, deposit money into your investment account using company payment methods. Note minimum deposit requirements.

Only invest spare cash not needed for short-term bills and expenses.

4. Select Your Investments

You can invest in various assets like:

  • Stocks – Buy shares in individual companies
  • Funds – Instant diversification into many assets
  • Bonds – Loan money for interest payments
  • Property – Generate rental income and capital growth
  • Company-to-company loans – Lend to other businesses

Research all options fully before investing.

5. Make Your First Investment

You’re now ready to put your business money into the market! Monitor investments regularly to ensure they remain suitable.

With the right platform and strategy, investing through a UK-limited company can provide an extra revenue stream.

Just be sure to manage risk prudently when putting your business capital to work.

Tax Implications

Investing through a limited company can provide tax advantages, like utilising Corporation Tax relief.

But it also comes with important tax considerations.

This guide examines key implications to factor into your decisions.

Tax Will Be Owed Whether You Invest Personally or Through the Business

To invest personally, you’ll need to withdraw funds from the business. This usually means paying Income Tax or Dividend Tax.

Investments outside an ISA could also incur Capital Gains Tax.

Meanwhile, investing via the business avoids Income and Dividend Taxes. However, gains are subject to Corporation Tax, which can be lower than Income Tax but higher than CGT.

Seeking tax advice can help determine the most efficient route for you.

Accounting Status Impacts Taxes

Micro-entities may pay tax on a historic cost basis, allowing tax deferral or offsetting losses.

Small companies pay taxes when investment value is realized.

Investing Could Affect Use of Key Reliefs

  • Investing over 20% of income may mean losing Business Asset Disposal Relief.
  • Losing Business Property Relief could increase Inheritance Tax.

Pros & Cons of Investing Through a Limited Company UK

Pros:

  1. Tax Efficiency: Corporation tax rates can be lower than individual income tax rates, offering potential tax benefits.
  2. Limited Liability: Investing through a limited company means your personal assets are generally protected in case of business losses.
  3. Flexibility: A limited company can hold a diverse range of investments, from stocks and bonds to real estate and more.
  4. Retained Earnings: Profits from investments can be kept within the company, providing capital for further investment or business operations.
  5. Cost Deductions: Expenses related to investments, like broker fees, can often be deducted as business expenses.

Cons:

  1. Complexity: There are various rules, regulations, and reporting requirements that a limited company must adhere to, which can be complex and time-consuming.
  2. Additional Reporting: A limited company’s financial activities are publicly recorded, and certain investment activities may require disclosure.
  3. Double Taxation: Profits are taxed at the corporate level, and again at the individual level when distributed as dividends.
  4. Reduced Access to Personal Tax Reliefs: Personal tax advantages like ISAs or personal pension contributions are not available at the corporate level.
  5. Regulatory Scrutiny: Depending on the scale and type of investment, you may be subject to financial regulations that wouldn’t apply to individual investors.

Before investing through a limited company, it’s advisable to consult with financial advisors and accountants to understand all the implications.

FAQs

Can I invest through my limited company UK?

Yes, you can invest through your limited company in the UK, as the company is a separate legal entity capable of holding investments such as stocks, bonds, or property. Profits from these investments will generally be subject to Corporation Tax, but the funds can remain in the company or be distributed to directors and shareholders. Before proceeding, it’s advisable to consult with a financial advisor or accountant to understand the tax implications and other considerations specific to your situation.

Can I invest in ISA from a limited company?

In the UK, an Individual Savings Account (ISA) is a personal tax-advantaged account and cannot be held or funded directly by a limited company. ISAs are strictly for individual investors and are funded from post-tax personal income. However, as a director or owner of a limited company, you could pay yourself a salary or dividend and then invest those funds into an ISA, subject to annual contribution limits and other ISA rules.

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Will Fenton is the founder of Sterling Savvy. He is a personal finance expert and writes about trading, investing, budgeting, and other financial topics.

Along with his education in Economics & Finance, he has experience working in the financial services industry in London working for one of the UK’s leading financial companies, “a trustworthy and respected provider of news, education and market analysis for the everyday investor”.

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