How to Invest your Company Profits

Updated 7 Jan 2023


Do you have money sitting in your business account? Would you like to invest your company’s leftover cash?

I have many friends who own small limited companies or are self-employed. The pattern usually goes like this: The business is profitable and starts generating some cash.  The business owner takes income plus dividends up to a point that is tax-efficient, usually around £50,000.

People cannot use the business cash remains without paying a huge tax bill and cannot expense it either because business expenses is a sensitive area only used for business purposes. As a result, the company profits stack up and a large amount of cash is sitting “locked in” in the business account.

I was in the same boat and I knew I was missing out. If you have a look at the UK inflation data (2.9% at the point of writing), cash is losing its purchasing power. In plain English, your cash can buy less stuff than today in a few years time.

My £10,000 will be worth £7,500 in 10 years time. So doing nothing was really not an option! Similarly, £100,000 will be worth £75,000. A £25,000 loss!

Having asked around in the community, it looks like people either do nothing or just take a big tax hit by withdrawing their profits. After researching all the options, it looks like there is a better way. In other words, investing through a limited company and not taking the money out until really needed. But, what’s better?

Take the money out and then invest or invest through a limited company?

In both cases, taking the first £50k or so almost tax-free makes sense. But what about the cash surplus?

Obviously, if you need the money for personal reasons (e.g. buy a house) there is no question. You just need to take everything out and take the tax hit upfront.

But for those (including myself) who want to put the money to work for them let’s dive into the math and decide.

To take the money out we would have to pay 32.5% dividend tax upfront. That’s a lot, but our money would then grow tax-free thanks to ISAs and other allowances. This is not always the case but let’s assume you and your partner have a £50k tax-free allowance.

Personal vs Company Investments
£60k cash surplus every year, assuming 7% annual return and 19% corporation tax when investing via the company. 10 years later, we’ve got £892,000 in company assets vs £640,000 in personal investments. The company investments end up £252,000 higher!

Copy my online Excel document (File -> Make a copy) and play with the numbers. As you can see, not paying the tax upfront gives us a nice £252,000 advantage compared to tax-free personal investments, even after paying the corporation tax on the profits.

At the end of the 10 year period, we can either take everything out of the company or we can simply withdraw as much as we need and pay much lower taxes.

You wouldn’t want to pay £289,900 (32.5%) dividend tax to take £892,000 out, so why do it incrementally over 10 years? The numbers stack up.

It looks like keeping the money in the company and accessing it only when needed is a much more profitable strategy. Even more importantly, if you stop working at some point and achieve financial independence. Isn’t this everyone’s goal…?

How to Invest your Company Money

How to invest your company profitsThere are two ways that you can invest via a limited company. Let’s say you are an IT consultant operating via your limited company: “Tech Guru Ltd”.

  • Option 1: A holding company (ie “Tech Guru Holdings”) owns your “Tech Guru Ltd” trading company and receives the cash surplus as dividends.
  • Option 2: You open a totally separate company and receive the money as a loan from “Tech Guru Ltd”.

The option depends on your time horizon and your goals. Generally speaking, having 2 companies as separate entities is a quicker, more short-term structure and easier to set up.

I, therefore, chose option 2 and decided I’m going for a commercial-rate loan in a timescale to be agreed. I documented the loan agreement in a signed letter from the trading to the investment company and I make regular bank transfers while keeping track of the money flow. There is no obligation to pay back the loan and I’m the sole director of both companies.

You may want to make it more formal by having the borrower pay a small interest to the lender.

If you invest via another limited company the trading company has better chances of qualifying for Entrepreneur’s Relief as long as the loan is repaid in full.

Entrepreneur’s relief means that in case you want to close down or sell your business you’ll only pay 10% capital gains tax on the gains. See also – Can I claim Entrepreneur’s Relief if my Company Invests?

Why not invest the money from your trading company directly?

Three reasons.

  1. The trading company should not get caught up in ‘non-core’ activities. There is a risk of your trading company being classified as a close investment holding company which has tax implications. Your trading company should trade only in its relevant sector. In our case, “Tech Guru Ltd” can build websites, provide hosting, etc but should not start buying buy-to-let flats.
  2. Legal separation: If there’s trouble in one company, your other company will not be affected in legal terms.
  3. Easier for tax purposes: The investment company will not have any payroll, VAT obligations etc.

In both cases, you need to open a new company. That’s actually quite easy and the website does a great job at explaining the process.

I opened mine online which costs £13 and only spent 30 minutes because I wanted to be super careful. You need to appoint a director (yourself), have a registered UK address and allocate one £1 share to yourself.

Note that you will need to provide a list of SIC codes, which technically defines the nature of your business. There are no fixed rules for what your SIC codes should be. Just focus on finding the SIC code(s) that best describes your investment activities.

Because I invest in shares and bonds, and I may invest in property too, I selected the following SIC codes:

64991 – Security dealing on own account
68100 – Buying and selling of own real estate

It’s better to set up a special property vehicle (SPV) if you want to invest in property. This is essentially another company that only invests in property. This way it’s easier for the underwriter to give you a buy-to-let company mortgage.

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In a series of online videos and live Q&As, you will learn about the right tax structure, how to choose and sign up for an LTD company brokerage account, stocks, property investing, crypto, choosing the right accountant, pension vs LTD investment company and other useful topics. 

You will also be part of an online community of likeminded individuals who successfully invest their business profits.

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    Can you invest business profits to avoid taxes?

    People think that by investing the business profits you can save on taxes. Well, not so fast. The trading company must still pay the corporation tax each tax year. In other words, investing does not reduce the corporation tax bill from trading activities.

    However, the main benefit is that the directors make a big saving on the income tax. That’s because the money does not yet leave the company which would otherwise trigger extra income tax.

    Let’s not also forget that investing might bring profits and these are taxable as well. However, that’s only if those gains are realised. In other words, in the stocks & shares world, if you “buy and hold” a fund but never sell, you don’t have to pay anything even if the fund price keeps increasing every year. You only make a gain when you sell at a profit.

    Dividends received at the company level are exempt from corporation tax (HMRC link). That’s as long as the location of the fund/shares is in the UK or in one of this long country list. This is great and an added benefit! The reason behind this is that dividends have already been taxed at the company which distributes them.

    Non-dividend income, rent from property, for example, is subject to corporation tax the year it’s received.

    Disclaimer: This is not tax advice. Ask for tax advice before you proceed!

    What should I do with business profits?

    The answer is simple: Invest in income-producing assets like stocks, property and bonds. Consider re-investing some profits into your business too if possible.

    That’s a complicated topic because different people have different tolerance to risk, different goals and taste.

    Have a look at my investing category for inspiration. A great book on the subject is called Smarter Investing by Tim Hale. It’s probably the only book you need to read to start investing wisely.

    My personal preference is broad low-cost index funds. By owning the whole market you avoid sudden shocks of one or two stocks dropping in value and wiping out our profits. Not to mention I don’t have the skills to research a company better than the quant experts employed at the Wall St.

    So by owning everything, I capture the whole market return and spread my risks across different companies and countries.

    Stock market Index funds

    My favourite investment provider is Vanguard who set the foundation of the passive investment industry. They have products that allow you to own a small percentage of every company in the world, thus owning the whole market.

    Vanguard Lifestrategy 60% equities, 40% bonds is a global balanced portfolio with a very low fee of 0.22%. You can invest with Vanguard directly but the minimum investment is £100,000.

    My investing experience with Vanguard has been very smooth so far and the customer service is excellent. To open an account, you need to fill out a form. Then you can start investing right away.

    If you feel more adventurous and want higher returns, just tilt the equity part of the portfolio and go for 80% stocks. If you want a smoother journey instead, go for 60% or even 80% bonds.

    The only drawback is that Vanguard don’t offer an online platform to buy, sell and view your investments online. Although in the beginning, it was frustrating, I now find it positive as it keeps me from checking my accounts every day and make bad investment decisions based on what the news said today.

    Note: If you want to invest directly with Vanguard, call them on 0800 408 2065. The UK-focused website doesn’t advertise business accounts just yet.

    Alternatively, you can go via a broker and pay a platform fee for using them.

    UPDATE 2020: Interactive Brokers offer a corporate account. It costs nothing to open and they recently removed their monthly inactivity fee. Interactive Brokers don’t have the £100,000 minimum requirement Vanguard has.

    Read how to open a limited company investment account with Interactive Brokers.


    Your company can invest in a buy-to-let property. Bricks and mortar is another classic way to invest here in the UK.

    A company can purchase flats and houses for investment purposes and rent them out. Interest rates are usually higher for limited companies compared to personal mortgages and lending criteria are tighter.

    But if you can find good opportunities then it’s worth looking into property investment. Check out the Rob & Rob property podcast if you want a good resource.

    Although I’m not investing in traditional buy-to-let directly, I am investing in property via Property Partner.


    I think Property Partner strikes a nice balance between stock-like REITs and traditional Buy to Let. REITs provide exposure to property but exhibit stock-like behaviour. So when the stock market falls, the correlation is very high.

    Buy-to-let, on the other hand, provides some very nice rewards in terms of returns. However, it involves a lot of hassle to find a good deal, requires a high initial capital and it’s highly illiquid. The other disadvantage I see is that you cannot diversify and spread the risk in 5 cities unless you have a very high initial capital.

    Property Partner is a platform I’m investing through that allows you to own part of a property, collect the rent and have it professionally managed. I like the idea, it’s been running since 2013 and it’s easy to register as a limited company.

    So far, the returns have been 5.2% a year.

    And here’s my experiment investing £50,000 over the next 5 years (starting 2018). I also met the team and started building a trust relationship.

    The Property Partner Experiment – Q4 2018

    A little hack: Since I’m investing in Property Partner as a limited company, the rent I receive in the form of dividends is tax-free! That’s because dividends received in an investment company are not taxed again. They have already been taxed at source.

    Peer to Peer Lending

    An LTD company can invest in peer-to-peer loans. They offer lucrative returns for lending cash to other people and businesses. I’ve written a Zopa review for investors you may want to read.

    TL;DR: Returns of around 5%, hands-off automatic investment, loan length of up to 5 years.

    The sign-up process is pretty straightforward as they need your business details, the director details and your money. As always, do your own research.

    Have you forgotten the pension?

    If you don’t pay yourself a pension then it’s definitely worth considering this option. Your company should pay a pension into a SIPP pot that grows tax-free.

    The best part is that the money going into the pension is not taxed by corporation tax. It’s a win-win situation for both the company and yourself and a great way to secure your financial future.

    You need to find the right balance between pension contributions and LTD company investments though. That’s in order to maximise tax breaks while ensuring you can access some of your money before the pension age.

    How to find a good accountant for Limited Company Investing

    I had trouble finding a good accountant that can implement one of these strategies and answer my questions.

    The truth is that not many people invest (outside their pensions) and even fewer have their company money working for them. This is why there is less demand for accountants who manage company investments.

    If you just want an accountant, please send me an e-mail at “michael at foxymonkey dot com” and I can connect you with one.

    In my experience, finding an accountant is only half the battle. It’s why I built the limited company investment course to take care of everything a company director needs to know before investing the company profits (including how to find a decent accountant).

    The LTD company investment course is way more than accounting. Although the right company structure is of paramount importance, the course goes beyond that. Here are some topics that are extremely useful:
    • Which investment platforms are best for company owners based on their experience/needs and sign-up tips
    • How to easily track your ongoing investments and tax obligations
    • Different exit strategies 5-10 years down the line
    • Property + HMO investing through an LTD
    • How different assets are taxed when investing through a limited company (not just what the final tax bill is)
    • How to actually choose a decent accountant for an investment LTD company
    • An online community of like-minded business owners/investors to discuss ideas and strategies
    • Which bank accounts to (not) use
    • Pros and cons of Pensions vs LTD company investing and how to balance between the two to maximise profits as well as tax breaks
    • Bonus resources such as videos, excel spreadsheets and reading material to succeed in investing

    You can register your interest for the course here. I respect everyone’s privacy. Your e-mail will not be used for any other purpose.

    Final thoughts

    I have been investing as a limited company for 5 years now and I’m updating this guide with new findings over time. On one hand, company investment gains are taxed by corporation tax, but at the same time, you invest a larger pot if you don’t take dividends out. It really makes a big difference.

    An added benefit of investing via a limited company is that the dividends received from stocks & shares and property partner are exempt from corporation tax. That’s a big plus.

    Investing through a limited company requires a bit more upfront work to set it up. That’s because you need to open a new company and a new business account, find an accountant, keep track of the loans etc. Nevertheless, this can be a much more profitable strategy to build your wealth and use it while travelling the world, raising kids, you name it!

    Want to read more? Visit The Company Hub, which lists all resources for limited company investing.

    What keeps you from investing through a limited company? Or are you not investing at all? Let me know in the comments.

    This article was last updated in January 2023.

    See also: Can I invest my business cash?

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      315 thoughts on “How to Invest your Company Profits”

      1. Great article. The reason I haven’t invested through an ‘investment’ Ltd company is the belief that I could only take out a ‘Director’s loan’ from my existing Ltd company which would need to be repaid inside a 9 month period. If this is the case then surely the ‘investment company’ would not be able to invest in any long-term strategy such as stock market index funds. Or am I wrong?

        • Hi Nick, great question. The Director’s Loan can only be used if you take a loan personally, as a director. But in this case, you’re not a person but a company and can take a loan from another company for longer than 9 months.

          Therefore, the same investment strategies that you would normally follow for personal investments can be applied to company investments too.

          • Hi Michael,

            Great website and blog, thank you!

            While reading it, it was like you were in my head and since then I have set up a second Ltd with the aim of investing my current Ltd profits as you described. Could I please ask for the above chat to recommence a little?

            I have set up the new Ltd with my current company as a corporate shareholder but I am still a little confused on how best to send and document the money. As Nick mentioned, a directors loan needs to be cleared within 9 months but interesting and it make sense that you say, this is not a directors loan but a company to company loan (or maybe in my case, Ltd original sending Ltd New its starting capital?).

            Have you gained a new insight into this method of sharing as I am buying and holding stock long term and don’t see how the new Ltd can make regular repayments. Also, do you have any resources to use to read up on the company to company loan pathway, please?

            Hope you’re well, Matt

      2. In theory can ‘company A’ loan ‘company B (investment Ltd) a loan over an unlimited period? Are HMRC fine with this?

        • Technically it’s not an unlimited period, but a loan in a timescale to be agreed. This is what I have been told. However, I’m not an accountant myself and it’s better to seek professional advice if you’re not sure.

          Feel free to report your findings back to the blog so everyone can benefit!

              • Hi Michael
                Some interesting stuff here thanks.
                Does anyone have a draft loan agreement that they can share that covers the necessary items for a Co to CO loan?

              • Are there any tax implications if 0%?
                I really don’t want to charge interest or repay capital monthly/yearly as I want the money in the investment company SPV to compound as much as possible.

      3. Hey Foxy,

        I’ve recently set up a limited company for one of my side-hustles, I’ll also be doing the same when I eventually start contracting. One thing I’m unsure/worried about is getting professional advise. From a terrible experience with solicitors, I don’t want to get ripped off when looking for an Accountant/Financial Advisor. Have you got any advice on the price to pay for an Accountant? Do you pay for them to complete your tax returns and handle everything for you, or just provide you with advise? Do you pay a set fee or a percentage fee, is it worth it? If you can recommend a good accountant that would be awesome too!


        • I understand your frustration, Silke, and speaking of solicitors I had a terrible and expensive experience in the recent past!

          Usually, if you operate as a contractor through an Ltd, or own a small business you expect to pay somewhere between £100-125 per month (incl VAT) for an accountant. That typically includes the annual accounts, a basic planning around salary and dividends and accounting software, such as Xero or FreeAgent so you can take a look at your business finances too.

          The accountants may offer a personal tax return as part of the package for the company director. Mine charge a £100 fee so I did it alone via FreeAgent last year. It was actually easy.

          Although I’m happy with my accountancy service for the trading company, I still haven’t found a viable solution for my investment company. Simply put, all I need is the annual accounts for a company that doesn’t have any Payroll, VAT or much trading activity. That definitely shouldn’t cost £1500 per year. That’s wiping out a big chunk of my investment gains!

          How do you manage your side hustle Ltd?
          I’ll send you a message regarding personal accountant recommendations.

          • Awesome, thank you! It is a little pricier than I hoped it would be, I’m assuming all of the costs are tax free though? As my side-hustle is through Amazon it keeps all of my payments nicely documented so I don’t really need to track it, I also don’t pay myself a salary and am yet to take out any dividends (I’ve only recently incorporated). Thanks for all of your help! 🙂

          • Hi Michael

            Great article by the way. I’m in exactly the same position in terms of having a trading company and looking to invest surplus cash.

            Now given that the article is over 18 months old, did you manage to find an elegant solution for getting the investment company’s accounts done?

            • Thanks, Tom. Yes, I have been doing it for quite some time now and company accounts follow the standard practice. I need to keep track of your trades I make, the company expenses and annual income. Then my accountant will review them and prepare my annual accounts. It’s manual and not so elegant but it’s not so bad in terms of time/effort plus it’s only once a year.

              • Thanks for a very thorough article, great idea and the calculations to back it up! I wonder if you really need an accountant for the investment company? You can file corporation tax yourself and since the accounts are simple, then I can’t imagine a tax inspector would have anything to fine you for. I use an accountant for my existing company who charges £600 in VAT for filing corporation tax, but don’t see why i would need to pay the same again. Hope all is going well for you, are you using Vanguard? I looked on their website FAQs and it says they don’t do business accounts.

              • Hi James, I invest with Vanguard as a business, yes. The UK-focused website doesn’t advertise business accounts just yet. If you want to invest directly with Vanguard, call them on 0800 408 2065. Thanks for reminding me, I wanted to update the article to reflect this. The process involves a bit of paperwork but saves lots of fees long-term.

                Regarding accountants, sure, you can do it yourself, definitely. I just don’t have the knowledge or the resources to learn how to do it.

              • Thanks Michael and sorry for my delayed reply!
                I will definitely contact Vanguard 🙂 perhaps my accountant will file the accounts for the investment company at a discounted rate. VAT returns are easy online but i’ve never completed a corporation tax return. Wishing you all the best

      4. HI, Michael,

        Thank you for the nice article.
        Could you highlight where do you invest through the second limited company?


        • Glad you liked the article, thanks! I invest in low-cost index funds (Vanguard 80% Lifestrategy) as well as peer-to-peer lending (Zopa, Ratesetter). The setting is very similar to my personal investments. Do you invest through your Ltd as well?

      5. Thank you for your reply Sir.
        I am hoping to invest, but major banks refused to take the investment on the company name. They were happy to have it with the personal name.

        I liked your idea of opening another company to invest and feed it from the original company.

        But Not sure which funds to invest. Ideally, FCA regulated!!

        • Always FCA regulated 🙂

          You’ll have to go through a fund provider, such as TD Direct Investing. If you provide all the company documents (incorporation certificate, year accounts etc) I’m sure they will let you invest as a company.

          • Hi Michael,
            I am looking to set up a LTD/SPV, so I can invest in my own New Build Property to the side of my existing house.
            I will be looking to transfer the land to the SPV from existing Joint names.
            Do you know much more about any Tax implications or can recommend an accountant that is familiar with this type of project.


            • Hey Nazrul, I don’t know your exact situation but yes there will be tax implications given a transaction takes place here. Capital gains tax for the land owners and stamp duty tax for the SPV come to mind. You will have to work with an accountant who has experience with this type of deals but unfortunately I cannot recommend any.

      6. thank you, I will contact them (TD) for more info.
        Zopa is not taking any more customers.
        Any other fund provider are you aware/dealt. Hargreaves Lansdown etc
        thank you so much for your time

        • I researched TD Direct but ended up going with Vanguard directly. You save on the platform fees as a side benefit, but the minimum investment is £100,000.

          Not a problem Ishaikh, happy to help!

          • I have looked on Vanguard’s website and there is no mention of accounts for limited companies, just personal accounts.
            Do you have contact details please

      7. Thanks.
        if you invest through the second company, would that be regarded CIC company, I guess if you have taken loan, you would have repay to the parent company.
        How long you can take a loan.
        Lastly: You would be keeping the investment for long term, so I guess the second company would not have any yearly profit as all money is invested.

        Thank you

        • “There is a risk of your trading company being classified as a close investment holding company which has tax implications.”.
          That’s the reason for opening the second company; to engage in pure investment activities. Loan lengths and CIC are also explained in detail in the post!

          Of course, there will be profits to declare if your investments go upwards. Because the money is invested this doesn’t mean there are no profits 🙂

          • Hi Michael,

            You mention in the article that you won’t be charged corp tax on the investments (shares for example) if they go up in value but you don’t realise the gains.

            So your reply here “Of course, there will be profits to declare if your investments go upwards. Because the money is invested this doesn’t mean there are no profits 🙂” I assume this just means that regardless whether your investment goes up or down – you need to declare the current state of the investment to HMRC for informational purposes only? As you will only get taxed when you sell out of your holdings at a profit…


      8. Good article!

        You say it is not a good idea for the trading company to invest the money directly because then the trading company “could be classified as a close investment holding company which has tax implications.” But taking your option 1 as an example, paying dividends up to the holding company and the holding company investing the money, is the holding company not then a “close investment holding company” and would that not have the same tax implications?

        Also do you know what those tax implications are?

        If it is a “close investment holding company” do the standard exemptions for small companies (turnover, size) still apply? This is an important consideration for small businesses where being allowed to file unaudited micro company accounts makes year end accounting much easier.

        • Thanks for the great comment Will. Please note, I’m not an accountant and this is not advice, just personal research and interest on the subject!

          According to HMRC:
          “The main effect of this subsection – Section 34 (2)(c) – is to exclude from being a close investment-holding company the holding company of a trading group or a property investment group, even where the group consists only of the holding company and one trading or property investment subsidiary.”

          Therefore, I believe that the holding company would not be classified as CIC. I don’t really know what the exact tax implications for close investment holding companies are, but I know that they cannot claim entrepreneurs relief. I also think CICs are not entitled to small profits corporation tax but they have to pay the standard CT rate.

          If you, by any chance, find out any accurate accountant advice, please report back and I will update the post accordingly. Looking at Google traffic, it looks like a lot of people are interested in this post.

      9. Hi there,

        Thanks for the blog post, this is an interesting idea.

        I’m not quite clear when you say:

        “You wouldn’t want to pay £273,000 (32.5%) dividend tax to take £840,000 out, so why do it incrementally over 10 years? The numbers stack up.”

        So how do you avoid the higher rate of tax? Do you just slowly draw down on what’s built up in the company account? I don’t understand how you get the 840k out of the company without incurring a lot of tax. Are you proposing that you close down the separate company that you’ve set up with a loan and get entrepreneurs relief on this?


        • Hi Andrew,

          Good comment. You don’t avoid the tax by keeping the funds in the second company but this gives you options.

          The purpose is two-fold: You invest a bigger sum as you build your wealth, therefore higher sum returns higher amount.
          You also get the option of drawing down funds at a lower tax threshold in quiet periods.

          For example, I may take a 2-year break during which I won’t have any income. It is more tax efficient to withdraw during these years than taking out the money upfront.

          Hope that makes it clearer!

      10. Hi Michael, I had come to the same conclusion as you and came across this blog whilst researching!
        Presumably you pay corporation tax on the profit\gain made by the investment – would that tax only be incurred when you sell the shares/funds?

        • Thanks for your comment, H. I believe you’d only pay corporation tax when you sell the holdings. However, I’m not 100% sure on that as I have not done my annual accounts yet on the investment company.

          Dividend income is exempt from corporation tax though, as another reader has pointed out.

      11. Hi Michael,

        I ran your numbers but surely in order to have a fair comparison you’d want to look at exiting the funds from the company? At which point the numbers turn favourably to investing personally.



        • Hey Ramzi,

          Investing personally is always less profitable because you pay higher taxes upfront, therefore starting with a smaller amount.

          The idea is that by taking the first £40k out and investing the surplus via a limited company gives you more options for the future. After a few years that you’re happy with your company investments you can:
          a) Take everything off the company, which will give you the same result had you invested personally in the first place. Big tax hit.
          b) Take as much as you need to cover your lifestyle while you stop being a higher rate taxpayer. Maybe you don’t want to work, you can only do part time, retire etc. That will give you a big advantage since you’re paying much lower taxes when you don’t have a big salary.

          Plus remember that having a company account is even better overall if you can make expenses. You pay lower corporation tax.
          As always, this is not accountancy advice and you should ask a professional 🙂 (and let me know!)

          • Thanks for your response! Not sure I agree. You do pay taxes upfront when investing personally but when investing as a company you are simply deferring them. When you apply the final tax costing of actually getting your hands on the money (dividend tax) the numbers should be identical. This also does not account for the CGT exemption and utilising the 20k ISA limits. At which point all things being equal it the numbers start favouring personal investment.

            • Ramzi, I think you’re missing the point. If you invest the money via a company when you are a higher rate tax payer but withdraw the money when you are a lower rate tax payer (when you retire) then it definitely works out better.

            • Ramzi, it will really depend on what you are trying to achieve. Most small business owners or contractors tend to leave surplus cash in their limited company in order to take advantage of entrepreneurs’ relief when they decide to retire or exit. This means surplus cash cannot be used for investment purpose. By moving the surplus cash to the 2nd company, it will be easier to invest the surplus cash without affecting the trading company’s entrepreneurs’ relief status.

      12. Hi Michael,

        The company to company loan strategy is very interesting. I’ve pinged this idea by my accountant, and they’re saying that because the companies are connected (you are director and shareholder of both companies) this will cause it to be treated the same as a director’s loan, with the accompanying disadvantages: year end + 9 months duration, potentially benefit in kind and national insurance contributions.

        I’m waiting on a reply from them with a source / section of the tax code where this is made clear; if you have evidence as to the contrary, I’d love that.

        Otherwise, very solid roundup and article.


        • Hi Theodor,

          It’s an interesting point of view but I hope it doesn’t hold true. I would be surprised since the two companies are totally independent and the loan goes from one legal entity to another (no persons involved). I’ve confirmed this with 2 different accountants before writing this post. Definitely let me know with references to the tax code!

          • Here’s the part of the Corporate Finance Manual where it details on connected parties: You are correct that the companies are separate legal entities, but they are also considered under the control of the same individual, and as such connected.

            However, I don’t have an exact reference for how this turns the company to company loan into a director’s loan. I took my accountant at their word at the moment. I’m considering weekend reading in hopes of finding a solid answer. Even if I find an accountant that thinks otherwise, at this point I’d like to see it spelled out in the tax code before I decide to do anything else. 🙂

            • Hi Michael,
              Any updates on Thendors comments.
              Shall we make a loan from company A to companyB which are two legal individual companies having same director.

            • Ok, I did a bit more research in the accountancy forums.

              To my understanding, a loan to another company in which a director is a participator is not treated as a director’s loan.
              A note about related parties must be present on the company accounts.
              Ask your accountant how to do this. According to the internet, it’s in a note to the accounts under the heading “related party transactions”.

              “This has nothing to do with Directors Loan accounts. All that is necessary is that a note be put in the accounts about connected parties.
              As the Director has not taken the money out and spent it on himself. The money has gone to another company (entity) and the other company will be spending the money
              on company expenditure (wholly and exclusively for business use).”

              Another useful article:

              Shall I charge interest between companies?
              In short, there is no need for interest to be charged as that will only add paperwork to the process.

              According to another article comments:
              The loans that are not formalised under an agreement to be paid on a specific date (and are therefore paid ‘on demand’) are not subject to FRS 102.
              Warning, there are many comments on this article!

              Now if someone is an accountant or if people ask their accountants like I did, please contribute to this thread and let’s make sure we’re doing
              everything in a legit way.

              • Hi Michael, really appreciate that you looked into this further! I read that same UKBusinessForums thread myself too when I was researching this same issue, and one of the accountingweb threads too. Widespread opinion agrees that company to connected company loans are not treated as director’s loans.

                For myself I’ve decided to hold off on trying this strategy, as I don’t have that much leftover this financial year anyway, so I won’t have anything to contribute to this discussion for a while. I think you’re right, but to convince myself I need to read it in the tax code rather than on a forum. But that’s just me, I’m also quite interested in it for the sake of it.

              • Hey Theodor, I appreciate your interest! I would also want to read it in the tax code.
                It’s just too hard to find the right one 🙂
                Especially when we’re looking for an absence of a relation. Thanks for stoping by. I’ll continue to update the article with further findings.

              • I checked with my accountant and he has confirmed what Michael has said. It cannot be treated as directors’ loan.

                In my opinion, a business to business loan will be fine. Both limited companies will be separate entities.

                I would recommend drawing up a business loan agreement and pay interest to your limited company. I would also recommend putting a disclosure in your company year end accounts of the transaction in the year it occurs.

      13. Hi Michael,
        Any updates on Thendors comments.
        Shall we make a loan from company A to companyB which are two legal individual companies having same director.

        • Hi There,

          A friend of mine has a Trading company with some cash surplus.
          If I create an investement company I guess Theodore issue (company to company loan considered director load because both company have the same director name) wouldn’t be an issue anymore no?

          Thanks !

      14. Hello Michael,
        Is there an issue if the Trading company starts an SPV with surplus funds and invests in Shares and property. In such case it acts like a holding company. I was told, the trading company can be closed at a later date while keeping the SPV since it’s a legal company on its own? Your comments pls.

        • Hey Chaks, I don’t have any experience in SPVs to be honest. But if it’s a company-to-company loan then it shouldn’t be a problem to shut the trading company down, right?

      15. We have a separate ‘property’ company set up to utilise amassed funds within our Ltd company. We then purchase property with said loaned money, and it seems to work very well so far…we did have to declare to HMRC that the directors of the two companies are connected….

      16. So in theory could you set up a separate Ltd company, buy the property to rent out, then pay into a pension to reduce your corporation tax to zero?

        • I don’t think so, I think you must pay the corporation tax from your profits first then you can put the left over money to pension. Is that right Michael?

      17. Michael,
        Great post and great analysis. I’ve been thinking and looking at this for the last 18 months (while my funds have been sitting in the bank earning zip!) Thanks for posting it and sharing your work.

        Are you able to message me directly regarding personnel / tax accountant recommendations?

      18. Thanks very much Michael, this is what I just have been looking for. I’m an IT contractor and can’t really receive any good information from my accountant. Could you please recommend your one and if possible email me their contact details please. How easy is to move from one accountant to another? Many thanks

      19. Hi all, been following this thread with interest…
        I am a professional with c. £80k surplus cash a year and am loathed to withdraw more than £40k personally to mitigate my tax bill!
        I already have a couple of properties personally so want to avoid any more, to keep a balanced portfolio.
        I have a holding company which I send dividends to from my trading co. (but will not also look at the loan option from this thread).
        I had several chats with IFA buddies recently. To minimise my Corp Tax bill I am looking at investment trusts for companies, some of which are allowable for tax relief. For the balance, I have been looking into a SSAS pension for company money and also VCT investments for personal money.
        All look very interesting for sheltering investments from tax and the SSAS is quite flexible (moreso than a SIPP).
        Oh and just to answer the latest post, pension payments from your company to you pension are paid pre-corp tax.
        Just some additional ideas for you all to consider…
        Do you own research, and best of luck to everyone.

      20. Hey guys,

        I’m in the process of finding a good accountant for investments and will let you know as soon as I have an update.

        There are so many people on this thread, I’m sure some of us can provide accountant recommendations/costs?


      21. Hey Michael, thanks for all the useful information you provide on this great blog – fantastic job! I’ve been thinking along similar lines which is how I came across this article – however, my research suggests that to invest in property you need to set up a SVP limited company whose only purpose is to sell, buy and let property. BTL mortgages are apparently very limited unless lending to an SVP. So you may actually need two separate companies – one for stocks/shares investments and one for property. I also wonder whether the SIC code for “Security dealing on own account” qualifies us to invest in anything we like including shares, P2P lending, fine wines/alternative investments – what are your thoughts?

        Do you have an accountant you can recommend who is clued up re all this stuff? I have found they don’t generally seem to have this knowledge at their finger tips with me having to do hours of my own research and then present it back to them with questions….less than ideal!

        Keep up the good work!

        • Hi Smitha, thanks for all the info, I have updated the post to mention SPVs as well. I have not invested in property yet but may do so in the future. In your experience, how high are the interest-rates compared to the personal ones?

          With the recent tax changes it only makes sense to invest via an Ltd as the mortgage expense will not be tax deductible.

          “Security dealing on own account” will only allow shares and bonds in my opinion. However, I have invested in peer-to-peer lending as well.

          PS. No accountant recommendations yet but getting there and I will update the post to let everyone know. Thanks for commenting!

      22. I’ve spoken to my accountant and he’s raised a big issue with the approach of loaning from a trading company to an investment company. According to my accountant, if more than 20% of your trading company’s assets are investments then your trading company is then an investment company and this means much less favourable tax circumstances for it. I can’t speak for your company but in terms of assets I think most contractors operating under an LTD won’t really have any assets at all. If you make a loan from your trading company of £10k to your investment company then that loan is a £10k asset owned by your trading company and a loan counts as an investment. Unless your trading company has at least £40k in other, non investment, assets then it then itself becomes an investment company, adversely effecting it’s tax status. ?

        • Hi Mark. Can you clarify ‘adversely affecting tax status’ please? Corporation tax rates for small profits and main rate are now the same so I’m not quite sure what you mean.

          • As I understood it, the main adverse effect is that the expenses incurred as part of the company’s trading activities are no longer tax deductible. This sounded like it included pretty much all of my current expenses, including my salary. I’m an IT contractor doing the standard contracting thing of paying myself through my own LTD, BTW.

      23. I’ve also been looking at using surplus cash in my LTD to purchase BTL property and/or invest in stock & shares.
        Has anyone considered the following scenario?
        Create a new Holding LTD (that doesn’t own or earn any money in its own right). The holding company owns Tech Guru LTD and a newly created SPV. Money from Tech Guru LTD can be paid to the holding company, the holding company gives this money to the SPV to purchase a property. The SPV ‘owes’ money back to the holding company, but it isn’t a loan, its owner invested funds which can be transferred back at a later date.

        This seems superior to the holding company owning just Tech Guru LTD as in this scenario if Tech Guru LTD were to become insolvent, administrators could demand the loan be repaid from the holding company/SPV (potentially forcing a property sale). In the scenario where the holding company (which owns the SPV and Tech Guru LTD) the money moves as Franked Investment Income i.e. Tech Guru LTD => Holding company. Maybe this adversely affects ER though for the trading company (Guru Tech LTD)?
        Any thoughts?

      24. What you are suggesting would work but there are few disadvantages.

        – only small number of mortgage providers would lend for this type of setup which means a higher interest rate
        – higher accountancy fee due to filing accounts for 3 companies

      25. Hi Michael ?,

        From Rob and Rob’s Property Podcast I’ve found some more info on the company to company loan strategy. They touched on it briefly in TPP125, around the 19:00 mark:

        It’s mostly the same information that you put out in your article, but thought I’d share for anyone else reading the comments who is interested in hearing another source on the topic. Myself I’m not in a position to do something like this now but when I do I’ll consult a specialist accountant’s opinion.


      26. Hi Michael et al,

        Thanks for the very useful post. Like many here, I’ve been frustrated by the lack of information on the topic. My accountant seems to be able to help only with the basic bookeeping. When I asked him about company investments, he said he couldn’t help. Judging by the comments above, this may be a common problem. Which makes me wonder why accountants stay away from advising on such schemes?

        I have also struggled to get any information from asset management firms when I called them to enquire about setting up a company account. You won’t believe but most of the customer service people there couldn’t help me. Surely the pool of surplus cash for all limted companies in the UK is large enough for asset managers to try to exploit it?

        Finally, Michael, something I wanted to clarify from reading the original post. With both the trading and investment companies, you’d be hit with a 32.5% tax rate if withdrawing dividends at a high income rate, right? So the advantage is, if you can live off for a couple of years with funds withdrawn under the basic rate, the investment company allows you to get returns on the trading co.’s surplus cash, i.e. eventually your 32.5% tax will be applied, but the after-tax pot will be larger than if it had sat as cash for several years. Did I understand correctly?

        Sorry I am not really adding much to the debate, I guess I am just sharing my furstration/experience. Thanks everyone for your input. I’d like to know if there are any updates on the scheme/accountant info.


        • Hi Alex,

          You got it right, yes. If you decide to withdraw from the second company you will be hit with a 32.5% tax rate assuming you’re at a high-income rate. The advantage if you set up an investment company is that your money simply works harder for you. Also, you can be flexible with withdrawals – take a year off or stop working (financial independence anyone?) so you can defer the tax for those periods that you’re not actively trading.

          I’ve sent you and those interested, an e-mail with accountant information now that I’ve found a good one.

      27. I may be completely overlooking something here but with either option of transferring money from company A to company B wouldn’t you have to pay 19% corp tax?

        In your spreadsheet/calculations you have only accounted for corp tax investing profits. My understanding is that purchasing assets is done AFTER corp tax is paid so in your example above the cash surplus would actually be £48600 (£60000 – 19% Tax).

        Please tell me i’m wrong as Id like to take advantage of this structure.

        p.s. I also advocate vanguards lifestrategy 80% equity fund.

      28. Hi,

        Forgive me if this is a naive question, but by using a second company an an investment vehicle, aren’t you still left with the issue of a personal tax hit when you eventually want to transfer those profits to yourself?

      29. Hey Michalis, I don’t believe I was just googling how to make use of the spare cash lying in business and your article came on top, that looks amazing man. You have written a very nice article which is like a step-by-step guide/manual that seems very helpful stepping stone. Good work done man and nice blogs on your site. Probably you will finally convince me to put my money to a better use.
        Keep it up!! 🙂

      30. Hi

        If company A makes a profit and loans the surplus cash to company b. Wouldn’t company A still be liable for corporation tax on company A profits?


      31. Hi there,

        You state that “the trading company can still claim Entrepreneur’s Relief as long as the loan is repaid in full” but if you have used that inter-company loan to invest (e.g. in property) and cannot easily sell up, you, therefore, cannot pay that loan back? Surely the Holding Company structure is better as dividends can be passed between companies and do not need to be repaid.

      32. Hi Michael,

        Great article and as you, I have found it very hard to find any relevant information on this subject, let alone any reputable adviser.

        I am just about to set up an SPV and to start investing some of my business’ retained profits using the process you have described.

        However, it seems you have now identified an accountant you could recommend. Would it please be possible for you to email me their contact details?

        Many thanks

      33. Hello Michael,

        Vanguard does not allow to open business account for trading on their platform. Do you know which platform allows UK business to open an account under business name not personal name for stock trading.


      34. hi Michael,

        If you don’t mind, can you please also send details of the accountant.

        I tried calling Vanguard and few others like youinvest They do not allow companies to open a trading account.

        Any one can suggest brokers who have access to funds, investment trusts etc.



        • Hi Kalpesh,

          Sent my accountant details over e-mail.

          I know Interactive Investors allow company accounts as well as Vanguard (global, not the ISA one) if you invest at least £100,000. I will update the article to include this info.


      35. Great article and really interesting reading through the thread

        Also infuriating how it seems impossible to get the money we’ve all earner without getting screwed. Annoying to the point were you just have to laugh at how much of a con it all is.

        Anyway, my question is. Are you still subject to the additional 32% Tax even if the investment company is considered to be part of a long term pension/share investment for the eventual retirement plan? Essentially acting as your own pension fund instead of using another provider.

        This may well have been answered but I skim read the comments.


        • Thanks Alex for your kind words and sorry for the late reply!

          You are subject to normal company taxes when it comes to your investment company and it doesn’t act as your pension would in terms of taxes. If I understand correctly, you ask whether your company can become a SIPP provider, which in my opinion would be a complex thing to do – and also out of my league.

          But if you plan to have your company as a retirement plan I think it’s still a tax-efficient investment given you leave the money to grow in there. Basically, only pay the corporation tax on the gains until you start withdrawing.

      36. Hi Michael,
        Interesting article.I have been doing something similar and have SPV company which has 5 BTL properties. I am not sure if I can use the same company to invest into stock market as well

        My accountant is no better than a book keeper. Would be grateful for an accountant advice.

        • Hi Ajay,

          I believe you would complicate things if you want to buy your next BTL given your SPV will now be doing more than one type of investments. However, I’m not an expert on this and you better ask a decent accountant. I can introduce you to mine if you want.

      37. Is it not possible to do this from your limited company directly, without setting up a new company (i.e. Option 1: A holding company or Option 2: You open a totally separate company and receive the money as a loan from “Tech Guru Ltd”.) ?

      38. Hi Michael

        It will be great if you could publish that list of investment companies that will accept investments in the company’s name, specially if you are like me and have less than £100,000 to invest.

        • Hey Cliff, I’ve mentioned TD Direct in the article (now Interactive Investors) which is one platform I know offering company accounts.

          While we’re at it: I am currently in talks with a company that will offer UK investments for contractors and limited companies, starting in the next few weeks. I’ll add a form here for people to submit their details, but if anyone is interested then send me an e-mail at [email protected] and you will receive updates when they’re ready.

      39. Hi. Interesting article. Thank-you.

        However, it seems to me there is a bit of blurring here between the stated objective of “how to invest company profits” and the various pro-cons of different types of investing.

        If we focus on investing in equities/funds etc, then I don’t see a strong argument for setting up as second company. The principal benefit you illustrate (of avoiding initial tax hit to take the funds out personally) applies equally to a investing directly.

        Also, as director of a second company, you have all the normal responsibilities and obligations of a ltd company or course and I personally think you’ve underplayed this aspect in your article imho. It’s extra work/time and responsibility. You’re doubling up all the interactions, HMRC, accountants, year-end accounting, company returns, and so on.

        If the investment funds will be sizeable (i.e majority of profits of the trading company), and will require oversight and executive actions (buying / selling property), then I get the second company route as the actions of buying/selling property for investment will conflict with the stated trading activity of the trading company (as you make clear). But realistically, is that going to be the case? I for one simply don’t have the time to run a property investment firm in addition to my main trading activity.

        My point is ultimately that the benefits are very much dependant on what type, and extent, of investments of company profits are proposed. For say less than £50k, investing the funds directly in equities/tracker funds from the company directly is probably a far more appropriate route. I can’t see how this is much different from moving the funds into a business savings account, except of course hopefully the gains will be greater, so don’t see how this conflicts with core trading activity.

        Have I missed something???!

        • Hi Steve,

          Like you, I would love to be able to invest the funds directly from my trading company. And you are right, you have to treat it on a case by case basis. A few points:

          £50k is an arbitrary amount. It really depends on the size of your business. If your turnover is 50k and you have 50k in investments, then yes that would be too much. I don’t know what the exact ratio needs to be, but you shouldn’t have higher trading taking place in non-core activities than core ones.

          Regarding hassle: It is a bit of an extra overhead to run another company, but not as bad as people think. That’s because your second company has no VAT, no payroll, and very few transactions per year (I had 10 in 2017). I don’t even need an accounting software. I only need a decent accountant for the company accounts once a year. Yes, it is extra work, but not as bad I thought it would be.

          The other benefit of having a second company and the article doesn’t mention is that you can claim investment-related expenses. Books on investing, property viewings in other cities, maybe seminars etc.

          Speaking of property, I have not invested in property directly (only property lending) but in my knowledge, lenders want to see a new SPV before approving a limited company mortgage. That’s because there is an additional risk if an existing company cannot repay the mortgage for reasons unrelated to the property investment. A lot of people do have the time to invest in property, and buying property through your limited company has some tax-benefits too.

          Bottom line, if you invest in funds and have a small amount compared to your business size, then, by all means, go for the direct investment (ask your accountant first). In my experience, it is not unusual to see people with £80-200k idle in their bank accounts earning zero interest.

          It is a blurry line indeed, which is why I wanted to open a second company and keep things separate.

      40. I’ve tried to invest directly in the company’s name and have been told the company needs to be FCA registered. Not certain what that entails.

      41. This is a great article, thanks. A couple of questions; points.

        1) You mention above “dividend income corporation tax though will have to be paid at the year-end” however, I am of the understanding that there is no CT paid by a company on received dividends that company receives.

        2) It has been established that a company that does 51% trading and 49% investments would be classed a trading company with BPR available for at least the 51% while a company that does 51% investing and 49% trading would be treated entirely as an investment company. Therefore assuming the investment is less that the trading activity, for simplicity would it make sense to conduct the investment through ONE company rather than creating two?

        3) On sale of the investment, is the whole investment liable for CT or just the gain (if there is one)? Eg: If the company buys an investment (property, stock, shares, funds) is that not a company expense off-set against CT? Therefore on the sale of the asset does the WHOLE asset not qualify for CT rather than just the gain?

        • Hi Anon,

          1) There is corporation tax to be paid by the company since dividend payments are just another form of earnings.

          2) It would be great if you can provide a link documenting that. I’m all up for having one company making all investments, but in my experience, it’s a blurry line which is why I kept things separate.

          3) It’s just the gain we have to pay the corp tax on.

        • Hi Michael,

          Sorry a bit late to this discussion but a point which seems not to be covered in detail is if the investing company is loaned money -surely on top of the monthly loan repayment you can repay back the loan exempt of tax in instalments which in order to claim entrepreneurs relief has to be paid 100%. So for instance by lending 100k to the investing co. the trading company can form a commercial agreement at 6% pa. or £500 pm. But also the trading co can reclaim the 100k loan over over a period of years with no tax or CGT.
          Another point, if as in my case, I loan the company from the sale of buy to let’s which becomes a personal loan-can I claim interest on the loan per month and take the loan back over time without tax implications ? There is I think personal tax to pay based on my personal income received.
          A further point is there appears to be a situation where shares can be exchanged between companies A and B which can reduce tax-which I noted earlier in this thread. Is there any more information on this subject.

          Thanks for your advice so far.

          • This is an ongoing article Craig, thanks for your insightful comment. You are right, one can repay the loan including capital in the repayments. The trading company will have to pay CT on the interest received and the investing company will show a loss for the interest. So no overall gain or loss, just an accounting balancing act.

            Based on my knowledge, lending money to a company means that you can be paid back tax-free anytime. However, if there’s an interest charged, then the interest paid to you from the company has to be taxed at a personal level. That’s on top of whatever other income you may have.

            Re your last note, I have not heard of a company shares exchange before, but then I’m not an accounting expert.

      42. In the scenario when “Company B” invest only in stock, ETF etc excluding real state market. Are you sure that “Company B” will be not caught as a close investment company?

      43. CT
        I am pretty sure that no CT is paid on dividends received by a company. The profit has already been taxed to CT before distribution (there is no double-taxation). See
        Important to make sure the location of the fund, EFT, shares etc is in the UK or one of these locations;


      44. Great article, this whole field is a complete mind f**k.

        I sold a large asset in my business in January for a considerable amount of money, since then the cash has been sat there doing f**k all and earning f**k all as I don’t have a clue what to do with it. I wanted to claim ER, but then I was scared by HMRC and their TAAR system because I would want to launch a new business in the ‘online space’ which is what my current company does, albeit a different market, slightly different model e.t.c.

        So, I am still at square one – trying to figure out what to do…nightmare!

        How is the company structure / investing going for you?

      45. Great page – I find myself here as I am in a similar position to many other people in the comments. As a single director of a contracting company, I am looking to invest on a monthly basis some spare profit from my main trading company.

        I expected to be able to just open a general trading account with a provider to allow me to buy UK based shares or funds. My accountants have advised this is fine as long as the account is in the company name and the investment activity is less than 20% (IIRC) of the main trading company. However, I am struggling to find a company in the UK who will provide a general trading account in a limited company name which is not classed as an investment company.

        Does anyone have any suggestions?

        • Hey AC, have you tried contacting Interactive Investors? I’m writing an article on how to open an account with them, but that’s as an investment company.


      46. Great article Michael, I’m looking to do something similar.

        Would it be ok to please supply the details of your accountant? I’m having difficulty finding one who will touch an investment company.


      47. Great article Michael.

        One poster commented “I’ve tried to invest directly in the company’s name and have been told the company needs to be FCA registered.”

        Is this correct?



      48. Hi Michael

        Also, am I right in thinking that the article still needs to be updated with the C/T and the spread sheet needs not deduct the 20% each year?


        • Thanks, Tim, you’re absolutely right. CT needs to be paid only at the end and the graph was deducting it every year. I have now corrected it and it’s now showing a £297,000 difference to personal investments compared to the previous £240,000. And that’s not even accounting for dividends being tax-exempt when calculating the final CT!

          Regarding FCA registration: I have called them in the past (08001116768) and they informed me that FCA registration is not required if there are no clients or any other members benefiting from the investment company. They were trying to make sure though that every corner is covered. Your case may be different. We still need a LEI code though.

          FCA registration was not needed when investing with Vanguard. Also, I have successfully opened an Interactive Investors as well as a property platform account last month and I will be writing a blog post about both soon.

      49. If there is no tax on dividends for investment by a company, is it worth investigating investments that main return is via dividends? In a way, that could be the ISA of the company investment world

      50. Hi Michael,

        Thanks for the article, I think it’s very useful.
        How do you deal with surplusses after you’ve already made the initial loan to the second company? Would you make a separate loan or is there a way to change the original loan and increase the amount?


        • Hi Enrico, good question. I make another loan each time I have a new surplus. However, I know that some people start with an initial loan larger than the initial surplus, and only lend the money in stages.

      51. Hi Michael,

        Thanks for this article, could you please help me to try and clarify the following doubts?

        1. How much does the new accountant charges for the investment company? I’m paying £1,500+ for the typical IT contractor company but as you mentioned, if one invest just in shares for example, the fees should be a lot lower?
        Could you pls email me the details of the one you’ve found?

        2. You mentioned “to pay first into a pension”, however following your example where let’s say the investment company (or the pension) has £1 million or more in a few decades, if the money is in a personal pension, there will be inheritance tax implications which are exhorbitant, whereas if the money is kept in a separate company those charges won’t exist when passing wealthy to another generation. Do you see a fundamental problem about using the investment company instead of a standard SIPP pension (not sure if I’m missing something obvious here)?

        3. I read your 3 points about why not to invest directly from your trading company but when I researched a few years ago, the points of legal separation and easier tax (as you’re already paying an accountant to do the tax of the trading IT Ltd company and doing a standard IT job I’ve never read any contractor having any kind of trouble with their company) were not a big concerned for me, point 1 about the tax implications resulted in a little bit more corporation tax a while ago, but I think at the moment it was the same at 19% since April 2017 if I remember correctly.
        * Could you please let me know what are your thoughts about the ‘tax implications that would apply if a trading company is caught and classified as a close investment holding company’? I don’t see any issue at present, the last few years, I’ve been investing directly from the IT Ltd company and just paying the standard accountancy fee (although I’m helping them to prepare/review the invesment figures at the end of the year)…

        Many thanks in advance!!

        • Joe, please see below:

          1) Accountant charges: It depends on the complexity of your investments. I’m paying £700-800 once a year for the company accounts. But I have no payroll, no VAT, no (investment company) pension and that’s just a Vanguard index fund, although this year I added property too (via property partner). I’ll e-mail you my investment accountant details.

          2) Pension vs company: The ultimate hack of using a pension is that you avoid paying corporation tax on your trading company profits. You invest pre-CT tax, therefore taking advantage of a 20% tax relief already. That’s why I love pensions. However, your money is tied until the pension age.

          3) I’m sure you can do invest directly from your trading company. But what if you invest 50% of your turnover? What about 100%? As stated in the article, the tax implications are that you won’t be able to claim entrepreneur’s relief should you want to liquidate the company. Not sure what else, given that you’re more of an investment company rather than an IT company. I’m not an accountant, so I followed their advice of keeping the companies separate. That may or may not be suitable for you.

      52. I’ve set up my investment company, loaned some money from my trading company and am just making my first investments. I think I will stick to investing in Funds in order to avoid needing an LEI number.

        I have just found out that Hargreaves & Lansdown allow you to open a Fund and Share Account as a UK Limited Company. They keep it very quiet! I can’t find any details on their web site, and it seems you can only get the application form by emailing them. It’s potentially a good option though as they only charge £11.95 per share trade with no annual fees or minimums, and you can buy and sell Funds for free:

        I just wanted to share that as it might be good option for investors like myself who aren’t planning to make frequent trades, so it works out cheaper than Interactive Investors. Thanks again Michael for such a helpful article and everyone for their useful comments!

        • Hi Jonathan,

          HL is a good deal if you invest only in shares, however, if you hold funds you will need to pay percentage fee based on your holdings as follows:

          On the first £250,000 0.45%
          On the value between £250,000 – £1m 0.25%
          On the value between £1m – £2m 0.1%
          On the value over £2m No charge

          II charges £90 flat fee per year, so the break even holding is £20,000 (£20,000*0.45%=£90). For any portfolio invested in funds with size >£20K II is the better deal.

      53. Hi Michael and all,
        thanks for sharing all your knowledge and experience! It’s very valuable!

        In terms of a SIPP, can you recommend any good pension plans if one invests say 600 – 700 a month on a regular basis?

        Also, could you kindly share the details of an accountant? I’m looking to change my current accountant and would be great to have the same accountant looking after both the main trading as well as the SPV company.

        Also, in a case of an SPV for property investing (with buy to let mortgage), are the expenses to do with the property fixes and maintanance tax deductible within that SPV? I’d assume so, but would be good to confirm with anybody who knows.

        If anybody is already investing in the buy to let property market, could you share your experience with such investing? What’s the average time horison when you can expect a reasonable return on investment? I would expect the funds would have to be tied in for a good few years period before the SPV can make a profit?

        Thanks very much in advance

        • Hi Oksana, some SIPP options are Halifax ShareDealing, Interactive Investors and BestInvest depending on the size of your pension. See the latest Ask me anything pension question:

          I’d assume the fixes and expenses are tax-deductible yes, but I’m not an expert on SPV taxes. I’m investing in property via Property Partner. The taxes are quite simple there as you have capital appreciation taxed as profit and rent in the form of dividend income which is free of corporation tax.

          I’ll send a separate e-mail about accountant info.

      54. Hi

        I came across your article and found it interesting.

        Using option 2 you wrote ‘There is no obligation to pay back the loan and I’m the sole director of both companies”.

        If the loan is not paid back does that mean the loan the trading company made would be written off?

        Secondly the investing company would have the loans as liabilities. So when it comes to closing it wouldn’t you have to pay off the loans first?

        • Hey Miz, both very valid questions. If the loan is not paid back, the trading company would need to write it off. My plan is to keep the investing company open and close the trading company.

          I’m thinking of the investing company as another income pot (without the age limitation pensions have). But I’ll have a clearer picture when I cross that bridge. If someone has done it already, please comment.

          • Hi Michael,
            If you plan on Closing the Trading company and not selling it, why did you not just invest through the Trading company in the first place? Entrepreneurs Relief won’t be an issue at point of sale if you are not planning to sell the company.

            Thanks for the insightful article, I am still unsure of what to do though! I think I need to speak to an IFA.

      55. Very informative article Michael. In fact I am also on the same boat and had been investing directly through company account for a long time. I am an IT consultant. I also like the fact that there are so many like minded people querying on this blog, it is kinda bringing people together to discuss similar ideas.
        I also appreciate your efforts in replying to various questions ppl have raised.
        I checked with my accountant and as long as my company Share/MF investments does not change the core trading, it is fine. That said, I yet to find the exact percentage on which the core trading purpose can change on records. Just a thought on that, may be I can add another SIC code to my company when I reach that point where investments are more than the companies actual earning/purpose instead of paying for accountancy fee on a separate investment company. will check with my accountant.
        I use HL and in past was using Fidelity (offline paperwork for buy/sell). I am planning to move to Interactive Investor soon due to low cost but their fund offering is limited.

        • Thanks, Anant for your kind words. Other people have mentioned investing directly from your trading LTD. Not sure what the exact revenue percentage is above which your company is classified as an investment company. So to be on the safe side and to keep things clear I opened a 2nd company. Fixed accountancy costs look pretty low once you start investing larger sums (percentage-wise) plus they’re tax deductible.

          You probably loved the switch from offline Fidelity to online HL! I’m investing directly with Vanguard and have to call them up every time I want to trade! #2019

      56. Hello Micheal, As always a fantastic blog.

        You quickly mentioned about selling the company and only paying capital gains tax of 10%. My question is, could you take this approach?

        Earn 100k in Ltd Company A – Sell the company and only pay 10% capital gains tax
        Earn 100k in Ltd Company B – Sell the company and only pay 10% capital gains tax
        Repeating the process effectively never paying more than 10% tax to take the money personally?

        I wonder if there are companies who purchase companies like this to enable this kind of strategy!

        • Interesting thought Llyr, but not sure if it’s legal! By the way, if you claim entrepreneur’s relief then you cannot open a company in the same trade for some time. I’ve heard it used to be a common contractor’s practice.

      57. Good stuff Michael – sincere thanks for your enlightening blog!

        I am looking to implement a similar strategy and had a couple of follow up questions that I would really appreciate your input on:

        – I assume I would need to set up a separate business banking account for the investment company and pay the loan into this account from trading company. The actual investments would then be purchased directly through the investment company bank account. Assuming this is correct are there any business bank accounts you would recommend, I use Santander but there is a monthly £7.50 charge
        – In terms of dividends being nominally ‘tax free’, when they are re-invested within accumulation funds as per Vanguard LifeStrategy suite – how would the no corporation tax on dividends then work when it comes to cashing in funds? do you have any clue how you would account for the dividends being tax-exempt when calculating the final corporation tax liability? I think Vanguard offer a Lifestrategy income share class which I imagine would be better to keep track of the dividend distribution which could then be manually re-invested (although it might get tricky if income distribution was made up of anything other than dividend such as bond interest?), I would be grateful have your take on this.
        – My accountant is not really clued up on any of this but has quoted me £500 year for very basic annual account, corporation tax return, confirmation statement etc. Does this sound in line with what you are charged? However can I also check that from your understanding corporation tax will only be payable on the profit realised when money is withdrawn from the fund making the accountants role even simpler every year there is no corporation tax to calculate (i.e left in fund) and only in play when I am ready to start drawing down funds in later life. If this is the case I am going to try and negotiate further with my accountant as in my mind it will largely be a dormant account for a couple of years (I am looking to make large initial lump sum loan and then leave for a while). However I have a feeling that this whole enterprise might be out of their depth so with that in mind would you mind sharing the details of the accountants you have referenced?

        Keep up the great work and many thanks in advance for your valued input.

        • Hi Lyle, extremely valuable questions here, happy to answer them.

          1. I’m with Santander too and I pay £7.50 a month. I’ve heard Starling offer free banking but they’re mobile only.

          2. How are dividends calculated if you’re in a Vanguard accumulation fund? Vanguard sends you a letter twice a year that literally says “You received this amount of dividends” along with the value of your investments. As long as you keep track of that, you should know how much you need to deduct in the end to avoid dividend taxation. I was also thinking of investing in the income share class to keep things clear, but I think if you invest in Vanguard directly this report should be sufficient.

          3. My (investment) accountant charges £600+VAT for the company accounts which is reasonable. You’re correct, corporation tax is only paid when you realise the taxable profit (i.e. when you sell). So if you only buy and hold funds, have zero expenses and no other investments then yes, your accountant will have little to do. Mine, for example, has to report some p2p lending gains and my property portfolio gains from property partner. But I provide everything in a nice format.

          I will send an e-mail to share details, sure.

          Such comments like this one make me feel a limited company / contracting forum should exist on Foxy Monkey. So many good comments that could’ve been threads in a forum. What do you people think?

          • Thanks for the insight Michael – with one ‘non-realised’ Vanguard fund to start off with in the investment company, I think it makes sense to go with the no fee Starling Business banking to keep the investment accounts as clean as possible: one loan payment in, one fund payment out.

            +1 for the forum

      58. Evening Michael,
        I have clicked on you link for ratesetter but when registering cannot find a way of setting up an account for a Ltd company, with only an offering of submitting my personal details (the same has been true for property partner)? i have left messages via both of these websites but just wanted to be clear that you have invested via your Ltd company (rather than through personal funds) in these products so that i can raise this with them?

        Also just with regard to the earlier info regarding ‘closed investment company (CIC)’ status I have contacted both my IFA and accountant. I have a reasonably well payed ’employed’ status job and have the benefit of additional (non-IR35) income (which goes into the Ltd company). I am investing the company money (most of which my wife and i do not require as dividends) in order to ‘work it’ rather than see it idle. My IFA (like our blog) raised concerns about the possibility of HMRC regarding it as an CIC but my accountant considers that as long as only up to 20% of the main company purpose gross income is derived from financial instruments then this should still fall within the realm of the company’s primary purpose and therefore still qualify for entrepreneurs relief (under current rules), i.e. £50000 of gross income per year would be allowed to accrue up to £10000 (20%) in interest/dividends etc. per annum though clearly with compounding this could quickly exceed this amount if investment income was simply re-invested!?
        Again i would seek professional advice/expertise if in doubt or have complicated arrangements?!

        • Hi Peter, thanks for using my links to sign-up. I highly appreciate it. Property Partner offers two tabs when clicking the “Sign-up” button. One for Personal and one for Business. Maybe you missed it as it’s not very intuitive but they should be able to sort it out for you. The customer service is quite good. I’m investing as a business with them.

          I believe RateSetter don’t offer a business sign-up option on the website, just a generic page –

          Thanks for providing your insights on the CIC status. I hope it’s not a problem for you. However, as the company profits grow, I’m sure there will be a limit to how much you can invest. Also, looking into the future, what if the LTD stops receiving trading income? Will you claim Entrepreneur’s Relief at this point or let it run?

      59. What a breath if fresh air to find such a golden nugget of an article on this subject! I’ve recently gone down ‘route 1’ and set up a holding company to manage and invest in property and funds.

        I’m in the process of opening a company account through Interactive Investor – they have amazing low flat rate fees. I’ve filled in most of the docs (which are available via the bottom tab under ‘Useful forms’ -> ‘Account opening’ -> Company account. I’ve come across a blocker at the moment though – trying to determine what bracket the Ltd Holding company needs to be filled under – is it an Active or Passive NFFE (Non-Financial Foreign Entity)? I thought the company would be classed under Passive, but my accountant highlighted the following from the self certification paperwork ( :

        ” The term “Active NFE” means any NFE that meets any of the following criteria:

        e) the NFE is not yet operating a business and has no prior operating history, but is investing capital into assets with the intent to operate a business other than that of a Financial Institution, provided that the NFE does not qualify for this exception after the date that is 24 months after the date of the initial organisation of the NFE;”

        Huh? Any advice would be very welcome as this has stumped both my accountant and myself.

        • Thanks for your kind words, Antony and for highlighting the process at ii! I had the same question when setting up my investment company (following the loan structure model). I called HMRC and based on my company’s nature it was a Passive NFFE. Later on, I stumbled upon this decision tree which might be helpful:

          I’d ask both Interactive investors and HMRC to be on the safe side. (and then report the findings here of course 🙂 !)

      60. This is by far the most succinct and all encompassing article available on this topic on the whole internet!

        Apologies in advance if the following is a silly/ obvious question to be asking…

        When mentioning Option 2 to our company accountant, he was concerned that a zero interest loan from Company A to Company B would be frowned upon by HMRC, and therefore have tax ramifications. Are these concerns valid? So far I’ve not been able to find a straight answer on the internet to back this up either way.

        Many thanks in advance

        • Hi Mark, lending on zero-interest between your own companies is perfectly legal my accountant says. However, to make the loan more formal, charging a small interest on each loan is preferable, as I also mention in the article.

          For example, one may want to charge an intercompany loan on a commercial rate, say 5%. It doesn’t change anything in the overall balance, as one company’s profit is the other company’s loss. The end result is the same. It just makes it appear as a loan between two totally separate entities.

      61. I am new to the contracting world ( 1 year in) and I have exactly this issue of getting more money out of the company. I am a little confused though as to how transferring funds from one ltd company to another solve this issue, as now the money is locked in 2 companies and I still cannot access it.

        • Your investments grow tax free so you end up with a much bigger pool of money at the end when you decide to take the high tax dividends of it all.

          This only works well if you do not withdraw your money above the 33%(?) high dividend tax rate until the end when you are finished with investing & working. The longer you do it for the better it gets, exponentially due to compounding tax free.

      62. Hi Michael,

        Great article. Hope your property partner investment is going on well. Do they ever sell any of the properties? ir have they so far and I would assume that in that case they will distribute the funds as combination of a return of principle and capital gains but I guess since this will be done (if at all) every once in a while, it will not impact much negatively in terms of tax implications to the company. If you sell shares in a property in an open market, do you need to declare those as profits as well? Have you looked at Housecrowd. Are they similar to Property Partners, I have researching them and have been interested in this space. It is just the worry about lack of control and selling when I want to that has had me concerned.

        Couple of other questions:
        I already have an account with Interactive Brokers from the trading company. Would be ok to add the SIC code you provided 64991 in the confirmation statement to reflect that or do I need to close my account, open a new company and then open another account with the brokerage house again. Just wondering because it is a real hassle and also commission and capital gains on the selling and buying of the positions in the new account.

        I have already created a company which owns one property in it. Investments have been through my personal funds and as a result, my accountant has told me anyway recently that I could follow the route that I just read today and take back the personal loan I gave to the company to buy the property. However, wanted to know if I register that same company in Property Partners, is that feasible or would it become messy and it is better to form another company to invest in Property partners or Housecrowd or something of that ilk. Thanks for your great article. Encapsulates responses to a lot of the issues that are questions in the minds of contractors/directors with liquid cash trapped in the companies and how to make best use of those. Keep it up

        • Great comment, Aditya. Property Partner has indeed sold 3 properties last year. I believe they have a voting system after 5 years of holding a property to whether to sell it or not.

          What I like the most about it is that I don’t have to rely on PP selling my property. I can always exit by selling my shares in the secondary market. I think that’s a great feature that most platforms don’t offer. As expected, when you sell shares (or property) in the open market you need to declare your profits so they are taxed. Rent in Property Partner, on the other hand, is received as dividends, therefore, is not subject to corporation tax when investing through a limited company 🙂

          If you look at the comments above, some people have just added a SIC code in their trading business as long as the amount is up to 20% of their turnover. But I’ve followed the 2nd company approach. Your SIC code question is more accountancy related and I’m not sure what the best approach is. You better seek professional advice.

          With regards to your other question, having a personal loan in the company gives you the advantage of being able to take the personal loan back whenever you want. Looks like this is what your accountant suggests. I know that usually, people open one SPV per property, but I don’t own any property directly, only through Property Partner. But I do own stocks and shares too along with my property investments. Maybe someone who holds a property can advise here?

          • Hi Michael,

            Thanks for getting back. Sorry for the late reply. I was travelling. I have got in touch Property Partners and had a long chat with Kyle who I found exceptionally helpful. I am also looking at all the scenarios that you have mentioned and is in the process of opening a new investment company for the PP portfolio and also liquidate my equity positions bought via my trading company name and transfer those funds to the new investment company for the equity component f the investment that I want to run.

            Not done the matched betting stuff yet as it sounds somewhat intimidating and time consuming but I will definitely bite the bullet and get on with it.

            Many thanks again for your help. Keep up the good work and all look forward to more informative updates and articles from you.


            • Thanks for reporting back, Aditya. I’m glad Kyle was so helpful. I’m trying to encourage people to understand what they’re buying before doing so, rather than blindly trusting Foxy Monkey.

              With regards to matched betting, I think if you have a large enough portfolio then the time spent doing it is not worth the money earned. However, nobody can resist tax-free cash so 😉

              • Thanks Michael, investment company opened and I added the two SICs that you mention ds above because I would do those two activities as well. I suddenly got confused after I opened the company as to how I would transfer the dividend from this new company to my trading company. So, I went back to reading your article one more time and understood that this is not required. Loan from my trading company to investment comps y can earn a 1% interest as per loan agreement but otherwise, the earnings and dividends in the investment company stays in there itself and keep growing till I decide to start taking dividends out of it. I am correct in my thinking right?

                I created the company with 10 shares though instead of one so that I could later on transfer some of my shares to my two kids at some point far far into the future.

                Have you heard of a company called BrickVest or dealt with them? I came across them today and they do property investing as well. I will do a bit more research on them. Let us know if you get time to look into them and your view.

                Matched betting is definitely worth doing. I have just been lazy and not done it. Maybe not make it a full time job but at least even a £500 per month that you mentioned you have done is useful chunk of change considering it is tax free.

                Looking forward to your reply.


              • Hey Aditya, you’re correct in your thinking about the dividend payments. I’m not sure about the inter-company loan interest though being 1%. My accountant suggests to set it according to commercial rates (i.e. 3-5%).

                I’ve never heard of BrickVest, sorry! I believe there are plenty of companies dealing with real estate, both equity and debt. One has to do their due diligence before choosing one. The loan agreement template I used can be found here. I think it costed me around £20. It asks different questions based on the amount, company structure, term etc and it changes the wording accordingly. So I think it’s better to customise yours rather than use mine but happy to send you one over e-mail.

              • Michael,

                Also forgot to ask. Do you have a loan agreement template between companies that can be used?


              • Michael,

                Thanks for your reply. Much appreciated. I am going to set the interest rate at 3% then to avoid undue scrutiny.

                Only, issue will be that the investment company may suffer a loss if the property partner portfolio is not big enough to compensate for this interest expense. But understand your point.

                I will take a look at the loan payment but would be great if you pop yours across on email.


      63. Thanks for this excellent post. It speaks precisely to where I am now – £500K loose cash in the business just gathering dust! I struggled with the dilemma you raise here of leaving the money in the business to avoid tax and equally there’s no obvious way to utilise the cash for growth (at least, not to that scale).

        This article brilliantly sets out some new options and, as someone who has been reading about investment recently, I love the idea of investing direct from the business. I also think it’s less emotionally charged (at least for me) and I’d be happier taking a long term view of the ups and downs that perhaps, were it my own money tax-paid, I’d feel more nervous about – irrational as that is given it’s ultimately all my money!

        Thanks again for such a useful resource – I’ll be working my way through each option to explore further.

        • Hi Nick, glad you found it useful. I had never thought about the behavioural benefits of investing as a Limited Company. Very interesting thought.

          As you rightly pointed out, like you, I am more disciplined when it comes to LTD investing. That’s because I know it’s for the long term. Also, knowing the company assets are harder to reach (unless heavily taxed) makes it even better! Good luck – looking forward to hearing how you will best put the £500k to work for you 😉


      64. Hi Michael,

        Fantastic article. Just wanted to clarify my understanding. I too, would probably opt for option 2 as well so basically:

        1. Set up 2 limited co’s. One for your business where you earn your cash from working contracts etc. The other is where you make your investments from.
        2. Any surplus cash earned from your “working company”, gets transferred as a loan to the “investment company”. The investment company is then free to invest this in stocks/trackers/property etc, no corp tax due on this surplus
        3. Looking in the future, if you wanted to wind up your working company, you would still be able to benefit from ER because you have two separate entities, so the working company isn’t considered one that takes part in investment activities.
        4. So now, you’ve wound down your working company and paid the 10% tax via ER, this leaves you with the investment company. How does it work from here? I see the options as, take profits out from the investments company – you pay corp tax on profits and then would you pay dividend tax when extracting actual funds from the company to yourself? What other options are there here?

        Hoping my understanding is correct. Again, this article is massive food for thought!

        • You got it 100%, Pieris! Not sure what other options are out there, as I am not yet ready to close my trading company. And to be honest, maybe I will leave it open for future one-off consulting opportunities. But your plan sounds very similar to mine!

        • For your 4th point you are correct.

          You would take the entire amount as dividends and pay the high dividend tax % on it.

          This is still much much better than taking the dividends as you go from your working company because your final pot of money in the investment company has grown tax free so it’s at a much bigger amount.

      65. Hi Michael,

        Lot of values in your blog post, thanks a lot.
        Could you let me know what are you thoughts about the following scenario ?

        Company A which is a UK Ltd company lends to Company B.
        Company B is located in another country (Spain) and is doing real estate investments.

        Do you think it is possible for a UK ltd company to lend to a foreign company ?

        • Great question, Jordan. I’ve been asked a few times and I must admit I don’t know the rules about company-to-company loans when the 2nd company is formed in another country. It would be great if one of the readers can answer that.


      66. Great article!
        Just a question though – have you considered a SSAS pension to park and invest your spare funds instead of a PIC ?
        From a long term point of view is SSAS a better option?

        • Hey KS. A pension is always a priority for me as it saves on corporation tax. But the problem with pensions is that the money is locked up until you’re 55 (or who knows what depending on future politicians). Therefore, there is some value in investing your surplus cash in a 2nd company which is accessible anytime.

      67. Hi Michael.

        Thanks for writing this post and answering questions. I’ve spend hours researching this topic after reading your post and today I realised there is even more information in the comments.

        I have a limited company doing Cyber security contracting and I have talked to my accountant after reading your post about option 2. As many people mentioned in the comments above there is lack of knowledge/interest from accountants to deal with anything other than standard contracting outside of IR35 setups.

        1. My question is if you can drip feed money monthly to the investment company through one loan agreement or do you have to only transfer lump sums and create new loan agreements every time you have more money to loan out for investing? How do you do it?

        I was thinking of adding in the agreement that the loan is e.g. 50K and will be provided to the investment company in monthly payments of 2k. And will be paid back in a timeframe to be agreed. I asked my accountant but he couldn’t answer that.

        Is there going to be an issue with HMRC if the investment company keeps taking loans from your trading company?

        2. If you could also please send me your accountant’s details.

        Thanks in advance.



        • Hi Peter, indeed comments info is gold! Managing the loan agreements is somewhat unclear so I’m in the process of writing a post dedicated to that topic soon. In a few words, it doesn’t really matter how you do it as long as you have it documented in a loan agreement. HMRC does not impose a maximum limit on the number of loans you can issue.

          Personally, I like to keep things clean. Every time I issue a new loan (say twice a year) it comes with its standalone agreement to be paid back in a timeframe to be agreed. It’s also advised to charge a commercial-rate interest something between 3-5% annually. Having said that, I know some other people issue a big loan but only provide the instalments in small batches which may be of interest to you given your recurring income.

          I will be sending my accountant details in private.

          • Hi Michael,
            Are you actually paying it back, or writing it off?

            If you are paying it back does this not defeat the purpose of the exercise? ie having money in a separate alone company that you can live off?


      68. Interactive Investor have just announced a huge fee hike on business accounts, a £30 a month supplement ontop of the 9.99 service fee.

        As a result I’m looking for an alternative broker, but struggling to find one that allows business accounts. Does anyone have any suggestions?

      69. Hi Michael,

        Great article! I was just wondering how you handle servicing the debt and making interest payments from your investment company to your contractor company? I notice you made a considerable investment with vanguard directly, that yields well below the 3% interest your investment company is bound to pay. Is this just a case of not making the payment and rolling over the interest into the loan?


        • Hi Steve, I keep some cash in the company account in order to service the debt payments as well as manage my corporation tax obligations.

          But I also receive about 6-7% dividends from my property investments which are corporation tax-exempt. That also helps with the interest payments.

      70. Hi Michael

        What UK stock brokers offer self-invest Company/LTD investment/dealing accounts for businesses? I know Interactive Investor do, but they’re just decided to quadruple their annual fee for non-personal accounts?



        • Hi Paul, I am still with Vanguard directly (but minimum £100,000 per fund) and Interactive Investors. II increased their fees to about £180 a year if I remember correctly, which can be a lot depending on how much you invest.

          A reader has mentioned ‘Interactive Brokers’ but I have not dealt with them before.

      71. Hi Michael,
        Amazing work, Sorry if this is already covered in a comment;
        I have been contracting through LTD company and have saved money in company account. I want to invest them into a franchise.
        1. Is there a disadvantage in converting current company to new business type?
        2. If I open a new company and loan money to it, will I pay CT on current years’ earnings of existing company or will it be considered as expense?
        3. Instead of loaning – can I invest into a second company?
        4. If I use ER; I pay 10% CT but do I also pay Self assessment/PAYE on the money I take from the company? (Or is there a relief for it?)
        Will really appreciate your advice.

      72. Great article Michael.

        I’ve had to figure out most of this myself over the last 14 years that I’ve been contracting but still a very useful article. Wish i’d found it earlier.

        Just a warning to anyone considering opening an account with Interactive Investor. They’re upping their monthly charge from £7.99 to £34.98 (£7.99 + £26.99) from November 2019. I’ve decided to transfer my stocks elsewhere.

        • Hi Shaan, you’re quite right I need to update the guide and perhaps remove them from the list. Overall, Interactive Investors will be charging LTDs for (£29.99 * 12 + £9.99 * 12) = ~£480 just to hold a corporate account. That’s a crazy fee hike compared to the £120 they used to charge.

          A reader pointed out “Interactive Brokers” as one potential solution (although more geared towards trading than buy & hold investing). Do you have any suggestions?

          • I think Interactive Investors might still be the best choice for very large accounts, even with the price hike?

            Eg. If I wanted to invested £250,000, Vanguard would cost me £550 compared to II’s £480 fee. Plus II has the benefit of online access.

      73. I was going to open an account with HL but then realised that they charge 0.45% pa for fund holdings which has put me off as most of my portfolio is funds. There is no charge for holding shares.

        I’ll take a look at Interactive brokers, Saxo and eToro (thanks Giovanni). Hopefully one of these might be better suited to fund holdings. Any other suggestions welcome.

      74. Hi Michael,

        Great article! When you transferred surplus cash to your Vanguard account, did you transfer the cash via a separate business bank account or did you simply transfer the cash directly from the trading company bank account to the Vanguard account?


      75. Hello,

        That a very useful and great article. I do have investment with property partner but not as a company. Would I still be exempted from taxes investing as an individual?
        I’m still a beginner in this arena.

      76. An absolute goldmine of information Michael and you have my utmost admiration for covering this subject.
        I’m in the position of having ceased trading in my Ltd Company, having taken on a Staff Role, but took advantage several years ago of investing my surplus within my company having discussed with my Accountant. For the last few years the share portfolio has increased from the initial 100k surplus to around 900k.
        1. Any shares sold incur chargeable gains at the current 19%, but I tend to recoup somewhat by transferring an appropriate amount up to the max 40k into my SIPP
        2. I’m also aware of the implication of being titled as a CIC now I have no trading profits, but as from a tax liability its the same 19% nowadays, it seems Ent Tax loss of 10% is the only penalty if closing the company if its a CIC?
        3. Frustrating that no clear answer is available on what is the best way of extracting your accrued cash, other than waiting for retirement and taking parcels in a tax efficient way.

        • Appreciate the kind words Keith, thanks. A 9-fold increase to your portfolio, a good problem to have 🙂

          I am not sure what other tax implications a CIC has. I believe the main one is that you cannot claim entrepreneurs relief. But then if you take the money out as dividends the tax hit is higher than 10% (assuming you’re paying 32.5% dividend tax).

        • Keith,

          How many years since you have ceased trading? Did HMRC classify your company as a CIC now?

          I’m in a similar position and couldn’t get a clear answer on how long you could stop trading before that occurs. In theory you could say the company is in a dry spell contract wise, and that you hope to start trading again in the future.

          What did you end up deciding was the best way to extract the 900k?

          My issue is that if I close the company there is a lot of capital gain on which to pay corporation tax. But if I keep it running I could loose the entrepreneurs relief, and it’s still difficult to extract the pot efficiently as my portfolio returns about 6% in income from dividends and bond interest. So just extracting that income takes up the lower tax bracket.

          • Its still unclear for myself EF. Now into my third year on a staff position as PAYE, so Limited Co, is mothballed at present, albeit I am realising some chargeable gains from investments to allow a Directors contribution to be paid into my SIPP to maximise the 4Ok allowance. I’m assuming if I applied for Entrepreneurs relief I would find HMRC saying no and having a huge tax bill. As I am fast reaching potential retirement, I have resigned myself to not touching my SIPP until such time as I have paid myself a reasonable salary from said Limited until such time as its consumed – or I’ve expired!! That said, adding “and son” to the Limited Company does pass on the dilemma. Sorry I can’t be more help.

      77. Interactive Brokers does not offer Vanguard neither HSBC funds for a small business/LTD companies unfrotunately. Neither does eToro – would you have any other alternatives beside II?

        • @Arek No other alternatives besides Interactive Investors and Vanguard (min £100k) for now I’m afraid. I need to do some research and post something. If anyone has any alternatives please comment.

          The VTI is a good all in one solution for investing in the US market. But that’s only a total US market fund, not a global one.

          Regarding Social investing. The idea behind ESG funds are investing more ethically by actively excluding evil sectors such as tobacco, casinos and oil. Now, to what extent ESG funds have an impact is a different question. Trying to boycott a stock in the secondary market (stock market) could be counterproductive to your financial goals which could hurt your ability to do good. So, if you disagree with a firm like Shell then don’t buy their gasoline. But refusing to buy their stock will have little to no impact on their actual business and that’s what will drive their stock price ultimately.

          • Thanks Michael!

            There is another idea that came to my mind, meaning investing the money sourced as a loan to the director (the max amount depends on the interest rate of the investment:

            As an individual one have a tax free interest allowance of 1k GB (if basic rate taxpayer) or 500 GBP (higher rate taxpayer). The excess is subject to personal tax of 20%/40% if in the basic/higher rates respectively.

            There are further conditions that would have to apply to the loan meaning:

            1. The interest of at least 2.5% (currently) has to be paid in order to avoid the benefit in kind;
            2. The loan has to be repaid within 9 months of the year end.

            Above would work well with a development loand of Property Partner (recent one is at 9.5% net) – by investing 10k as an individual can get 950 GBP which stays within the limits of the free interest allowance and is only subject to 2.5% of the loan repayment.

      78. Hi Michael
        I’m a portfolio landlord with one ltd company containing 2 properties which I intend to develop and I’ve loaned it personally to find the purchase of these two properties. They will be developed into flats.
        Then I have 4 properties in mine and the missus name waiting to be hit by the BTL tax ie loss of interest relief. Can’t afford to convert over to ltd companies due stamp duty and capital gains hit. Then I have a ltd company from which I earn contracting income.
        It’s been frustrating that I’ve had to go my own research and have been skinned by accountants promising the earth but not having the skills to mitigate my tax and shelter my income.
        Your article and forum has been a breath of fresh air to someone fumbling around to develop tools to shelter and mitigate on my own.
        Thank you
        Could you please let me have your accountants and an example of the inter-company and personal-company loan agreements .
        Any suggestions To create a sensible companies structure to allow me to use money earned buy and develop properties for both to sell on and to keep in an investment ltd company would be great. By the way I am 57 for pension purposes (have no pension) and the wife is a contractor as well in our trading company.
        Kind regards

        • Hi Shah, I’m sure you realised that once you start to deviate from the usual ISA, 10% pension mainstream advice then you have to look deeper for answers. I spent a lot of time before writing some of these posts. I guess not all accountants are able or willing to explain so I hear you! Good to know you like the blog and it’s helpful.

          I will send you an e-mail regarding accountants. Since you already have companies set up for property it may be that a holding company is the way to go. Other readers set up one SPV per property which helps with lending. Since you’re also near pension age and have no pension, the tax benefits would make a difference for both you and wife. No corporation tax to pay on the contractor’s profits if it goes to SIPP. You can also buy commercial property in a SIPP.

          • Hi Michael-You can invest in commercial property through a SSAS but I don’t think you can in a SIPP. I was thinking of setting a SSAS up and moving a commercial premises into it and possibly shares. But I do like your advice on the inter company loan structure which I will do and may also link this to a SSAS as mentioned. I think it can get complicated though with this structure and more suited to developing mixed use property sites. Great information though.


      79. Regarding the money that is loaned to the investment company. Is it only retained profit cash that you are loaning or are you loaning income that is not yet been subject to corporate tax rate?

        i.e trading company end of year date is 28th March 2020.

        The company has expected profits of £250,000 for year-end 28th March 2020. To avoid paying corporate tax on those profits can the trading company loan £200,000 of this income to the investment company, leaving only £50,000 as “profit” or do you only loan money from the trading company once the corporate tax has been paid e.g pay corporate tax on the £250,000 (47,500 tax) then loan up to £202,500?


        • The loans investment company has taken is a liability and not an expense. Therefore, even if you pay the loan from the profit, you still have to pay the corporation tax. Only way you can save corporation tax is by paying interest to the parent company but then the parent company will be paying corporation tax on the interest income.

      80. Inter company loans ar useful and I have used them in the past to purchase commercial property as investment.
        My strategy now is to is to purchase holiday lets via ltd company this is classed as a trading company and although profits are taxed, In future when company closed entrepreneurs relief of 10% !

      81. Dear Michael,

        Thank you. This is a great article and I have read your article and comments and discussion in detail. I really appreciate the fact that you have kept the article updated and answered the comments.

        I am in exactly the same situation as you were when you wrote the article i.e. significant funds built in the company accounts going down in value with inflation every year. Last year I set an property company as a Special Purpose Vehicle (SPV), and the main company loaned this SPV some funds to buy it’s first property with cash. I plan to buy 4-5 properties by remortgaging the first property as Buy-to-Let as it has generated more than 6 months worth of rent. However, I am still left growing positive cash balance and do not want to buy more than 5 properties and was researching for investing via limited company and I am glad your blog came at the top of the list on google search and I promptly subscribed to your newsletter.

        Now that you have experience of investing via a limited company, I will be grateful if you could answer few questions I have:

        1. Vanguard do not advertise corporate account or limited company accounts on their website, however, do they still offer these if I call them or do I need to go through brokers. I would prefer to deal with Vanguards directly, however, if possible.
        2. If I understand correctly from your post, if you keep on reinvesting the yields from index funds, you don’t have to pay any corporation tax, is my understanding correct?
        3. I read while researching for investing via limited company that if I stop working via my limited company by taking extended break or even if I am working but the investment income from Investment company is more than core business, the company will be classed as Closed Investment Company with higher corp tax rate and higher dividends tax rate. What’s your or other reader’s opinion and experience with that. This is important for Financial Independence piece in near future when the investment income is beyond the FIRE Calculator threshed of success in near future due to compounding yield and reinvestment.
        4. Last question- When it’s time to start tapping into the investment income using 4% rule in future, do you have to pay tax on that 4% only?

        Thank you so much for providing your thoughts on these questions and I will take time to read all your previous post and will look forward to your insights in newsletters in future.

        • Thanks for your kind words, Peter. Please see my answers below:

          1. You can invest with Vanguard directly, please read this post in more detail for instructions.
          2. You don’t pay corporation tax on the dividend income, but you do have to pay corp tax on the capital appreciation part.
          3. This is why we open a 2nd company – Please read section: “Why not invest the money from your trading company directly?”
          4. I don’t really understand the question. Whatever you sell you need to pay tax on the capital gain part. If 4% is what you plan to sell every year, then you pay corporation tax on the gains (minus expenses such as salaries etc).

      82. Hi Micheal

        Great article.

        I have only been limited company for one year and was thinking through how to get money out now I am in my second year.
        With muted rumors in the press of taking away the 40% tax relief on pension contributions. (It would not surprise me as they have pillaged everything else). Where do you put your money?

        I guess my questions are very similar to Peter Parker’s above.

        Another thing I was thinking and correct me if its a daft question. Are the fees charged by any of the investment platforms not claimable business expense’s?

        As with all the people above, when asking my accountant these sorts of questions he dose not have much of an idea. If you could pass on the accountants details you have. This would be fantastic.

        • Hi Ian, my money is split into different asset classes, mainly via Interactive Brokers and Property Partner. You can read more about how I invest here.

          You’re right in thinking that the brokerage fees are deductible expenses which is always a plus. Regarding accountants, I’ll get in touch over e-mail.

      83. Hello Michael,
        Thank you for this great article and discussion. I would need to read most again as it has lots of useful information. Thanks for sharing.

        Do you have/ recommend 2 different companies if you do invest in both properties and shares/funds or can they be done via same company.

        I would also be grateful if you would be able to send me the details of your accountant that deals with investments and indication of their fees or any useful info.

      84. Very detailed, articulate and helpful article. Trust me my accountant doesn’t know all the stuff you detailed in this article.

        I have 2 quick questions for you please if you can answer:

        You state that “the trading company can still claim Entrepreneur’s Relief as long as the loan is repaid in full”. I have similar setup as option 2 in your article. Owing to the IR35 regulations and the recent proposed Entrepreneur’s Relief tax rate changes, I was considering closing my trading company but keep the property company still open as I don’t intend to sell the property etc. and repay loan.

        1) Would it be possible to extract the residual funds in the company that loaned money and get ER?
        2) If so would the capital gains be charged on: a) what is left current with the loaner company or b) On the amount left with loaner company + the loaned amount (as these were profits to begin with) ?

        Thanks in advance.

      85. Awesome post Michael.

        One question though, as my situation is slightly different. I am looking to MVL and claim ER, so surely in this situation, doing an MVL, claiming ER and then creating a totally new limited company to invest in stocks would be the most beneficial as I would then be owed the money from my new business meaning I can take it out tax-free if/when I want to?

        Do you see any implications with this?


      86. Hi Michael,

        Very good post and this has made me think to do with my surplus business cash; especially with the recent fall in shares due to COVID-19.

        I have a side hustle; Trading Company (A) and and soon to be Investing Company (B). For ease of numbers say I have £10k in surplus cash in Company A. Can I loan all of this £10k to Company B or do I need to hold some back for corporation tax to be paid on this surplus net profit?

        I don’t take money out of the business for wages as I work full time so all profit is just accumulating in the business as surplus (after asset expenses and stock purchasing).

        I don’t want to be in the position whereby I invest all my surplus cash and then get issued a corporation tax bill on my hypothetical £10k net profit which I then can’t immediately pay due to being tied up in shares.

        Hopefully I have got this wrong and the fact that I would be loaning £10k to Company B means that in theory I have no net profit therefore not corporation tax bill?

        I’ve only been trading for 1 year so this is all interesting and new to me!

        Any help would be great!


      87. Hello.
        I am keen to invest my ltd company retained profits via a sister ltd trading company. I am the sole director of both businesses.

        My question is who did you use to bank with? I can’t get a single I’ll bank to accept my trading business. Please can you suggest a UK bank?
        I’ve tried


      88. Hello Michael. I just wanted to thank you for this valuable piece of information. Its rare to come across exactly what you’re looking for online. Its given me a direction to explore in terms of investing through my company. I may drop you an email asking for the accountants details. I have your info. Thanks

      89. I have been doing this for a while now, very happy to see someone thinking on the same lines. This is an incredibly valuable body of work.
        Many thanks for this.

      90. Foxy. What do you think of using the BBL loan the government is dishing out to invest for 6 years (2.5% interest pa from Y2 onwards) to invest? Seems like free money.

      91. Let’s assume you have 100K profit in company A. You take it out as dividends and pay 32.5% tax. You are left with 67,500. You invest that and double over 10y. 135k – 27k (CGT 40% on 67,500) = 108k in your pocket all taxes paid. You can use your annual CGT allowance cleverly and reduce this much further and may even be able to keep all 135k.

        Let’s look at company B getting 100k. All invested and doubled = 200k. – CGT 40% on gains = 160k, 100k returned to company A: dividend tax of 32.5=67,500 + CT+Dividend tax on 60k left in companyB= 27195 leaving 32,805 + 67,500 = 100,305 with no chance of really reducing this much further.

        In my opinion, you are better off taking the money out and investing as an individual if you are a higher rate tax payer. I haven’t done the calculations for a lower tax rate, but should still be similar.

        • There’s no Capital Gains Tax when operating as a company, Narendra, so your calculations are way off. Assuming same returns in the company, your £200k would be subject to 19% corporation tax, (so tax on £100k profits = £19k). Then you can extract the £181k however you want from the companies.

          Also, depending on how you invest, one could argue that corporation tax can be much lower than £19k because dividends received are tax-free. See the graph and the Excel calculations on the post for a more detailed breakdown.

      92. great post, thank you. I have a question though when you transfer money from trading company to investment company, what is that categorized as? a loan? If yes, is there a legal agreement that needs to happen between 2 companies, and if yes, do you have a template that can be used for that? I guess the agreement would need to say for how long is the loan interest-free etc?

      93. Hi foxy, great read thanks..

        As per the article , am i right in thinking that any cash surplus in your business you are referring to and considering investing as described above already has corporation tax taken out?, i.e the 60K you are pushing into the investment company , then into shares has already been taxed, and therefore the deferred 19% tax referred to above just relates to the realised share gains?

        Secondly- If i start a business but stayed full time employed elsewhere (PAYE), and don’t draw anything out of the business in salary- this means I could not make any pension contributions as a non paid director (moi)? ( probably a totally daft and obv question)!!

        Many Thanks- Rick

        • Hey Richard, the funds can be invested only after the corporation tax has been paid. You cannot make personal pension contributions that exceed your salary but I think the business can make pension contributions to you, also known as employer contributions, straight into your pension. Ask your accountant before starting out.

        • You can make pension contributions up to the annual limit of £40k (in total from all pension contribution sources). You can carry forward the last three years where you where *registered* with a scheme. If you are not registered you cannot claim unused pension contributions. If you make contributions beyond the allowed limits you have to pay income tax on the contributions.

      94. Hi Michael,

        I have a question about the funds in the company asked by Interactive Brokers. What was your answer to the following requirement?

        Please confirm that the funds used to be traded in this account will only be in the name of the limited company you’re applying with and will not contain any customer or third party funds.

        I’m applying with a newly incorporated company using the money as a loan from my contracting company as you suggested but having trouble with this question as the money won’t be in the name of the investment company.

        Many thanks,

      95. Hi
        Is it be possible to loan monies obtained via the BBLS scheme from the trading company to the investment company? Would appreciate any views on this thank you.

        • This is probably one of these cases where Michael’s (Hi Michael) idea doesn’t work.

          The problem is that as a Director you cannot give preferential treatment to one creditor over an other when you are dealing with funds you have borrowed.

          This means you cannot use BBLS money to post a dividend and I suspect you cannot lend it to another entity in which you are also director. The problem is that if your sister company makes losses you will still become personally liable for those losses.

          Possibly you could create a daughter company and invest the BBLS money in that company, but you need to seek professional advice. I would expect that that would not trigger a personal liability but you need to tread carefully.

        • Thanks for your response Per. I will seek further advice. I appreciate these are new developments and there is not a lot of information about at the moment.

      96. Hi Michael,
        I recently spoke with my accountant and he said that I do not need to create a separate company to invest in stocks(as long as I am using limited company profits only) after paying the dues(VAT,CTax) obviously. So I can basically use the existing ltd company(SIC Code is in Information technology area) to invest in stocks using the surplus money. He categorically said that it would not create any HMRC tax issue in future. A new company would be needed if I intend to invest others money in stock. Also I would be still eligible for Entrepreneurs Relief later if I need to. So I am going with this .. Now I need to find a broker who can open a corporate account for the limited company. Any suggestion is welcome.

        • Hi Raj,

          I am interested in what you’ve mentioned here as my accountant has stated something similar in terms of being able to use my existing company and investing through that, so long as the company is still actively trading.

          I would be interested what corporate account you have found?

        • Yes I found it is actually really hard to find a bank which will offer a business account to a business with SIC codes which Michael uses, namely a business which doesn’t sell anything and just exists for investment purposes. They all seem to be blocking this as a route, at least for the ones you can apply for online such as Starling, Monzo etc. I thought I had sorted it with Starling, but they’ve just come back to me to say they can’t support this type of business after all, so looking for an alternative now.

      97. Hey Michael,

        Inspired by you and your article, after maxing out my ISA in March. I decided to open a Corporate account, with hl not accepting any more corporate applications. I went ahead with intractive investor. 4 months later my account is live, almost up and running.

        However now to trade US shares, they want me to fill in a W8BENE, not the same as a normal W8BEN, which ive filled out a ton of times. Wonder if for your limited company account you did the same and any advice on what to write in section 14. my 2 hour research has left me more confused.
        This is what i have so far, pulling random info from around the net and some treaty agreements i read.

        I would appreciate any guidance.


          • Hi Michael

            This may be covered somewhere here so apologies if I haven’t found it yet. Are there any reasons you don’t invest in US (international) equities? Are there further complications that you’re aware of? Or is it simply to make your life easier?


            • Hi Kevin, I do not invest in US equities simply because I do not invest in individual stocks. I mainly invest using UK or European-based funds that also hold US equities. Hope that helps.

              • Cheers Michael

                I can understand that. I’m going the route of stocks and funds I like (we’ll see how that works out). I guess my worry is around Forex, international dividends and the tax implications.

                Think I’ll be bothering my accountant soon. She will not be happy 🙂

                Thanks !

      98. Thanks, Michael for taking the time to reply, with this being my 4th attempt. I think I’ve cracked it, they mentioned two outstanding issues in the last attempt, both i have fixed.

        Thanks for the ETF tip, my morals don’t align with all companies in these ETF’s, so I hand-pick some. Makes life all that much harder. Anyway, you inspired me to set this up, so thanks again.

        • Glad you sorted it out, Bill. Any findings are welcome for everyone’s benefit.

          Also, the ESG trend is rising so hopefully it’ll become easier (+cheaper) to invest ethically.

      99. Great article. I have been thinking about using company profits to invest for a while . I am wondering if my current trading company (online retail) can invest directly in physical precious metals (gold). I imagine I can do it immediately as you do not need a trading account. I am also currently trying to figure out a company structure moving forward as I want to open a property company for buy to let but also open a trading company for stocks etc. I would loan money from my online retail comoany to the other two. I want to loan that money for free though. Any info appreciated and if you have any accountants that are experienced in this area could you pass on any info 🙂

      100. Have you looked at SASS pension? Basically you pay into your pension then use it to “loan” to your investment company? So no corporation tax…..

        • Pat, can you elaborate on that? How does the loan work? I know you can purchase commercial property through your pension and then rent it out to your company. Is this what you mean?

          • Hi Michael, yes this seems a smart move especially if you hire office space to run your business. Dont know much about it as only had my side hussle running for 1 year. I think your SASS can also make loans back to the company or purchase its shares.

      101. Hi
        Good Article! thanks for sharing your experience.
        Quick Question:
        My Limited company has a good history so in that case, can I take a Business Loan and invest in other Local (UK Based) companies or International Companies?
        Do I have to pay VAT or Corporate Tax on the dividend I will be receiving from those companies (UK and International)?
        And based on that what do you recommend, invest in local companies? or are there tax benefits investing in International Companies?
        Please advise.

      102. Hi There,

        A friend of mine has a Trading company with some cash surplus.
        If I create an investement company I guess Theodore issue (company to company loan considered director load because both company have the same director name) wouldn’t be an issue anymore no?

        Thanks !

      103. Hi Michael,

        Do you have a SIC code for the P2P lending element of your ltd company?

        I have an SPV which I plan for both physical real estate as well as platforms like property partner.

        I also have a ltd company for security dealing for stocks and shares.

        Do you do P2P via your property company or share company?


      104. Hi Michael,

        Happy new year.
        I have done a lot of researches about how to extract or make work surplus cash from a LTD company and didn’t find a lot of information online so this post is really great.
        I have a question related to IR35 and limited company cash surplus investment. From April this year, a lot of us might be forced to close their limited company as jobs outside IR35 will become rare. The natural route will be therefore for a vast majority to use an MVL to get out the cash surplus and then invest it via an investment ltd company or directly depending on personal situation. However, would there still be advantages of keeping open the limited company even if the company is not trading anymore and loan regularly money to an investment company using the cash surplus? Is it something covered in your investment course?

        • Happy new year, Phil. Indeed IR35 is another reason why one should perhaps consider LTD company investing. The routes you mention are valid. One needs to run the math to decide if it’s better to MVL and invest through an LTD or not MVL at all and treat the company funds as a “mini-pension”. It all depends on personal taxation and goals.

          The course has an entire section just on that – Exit Strategies. We look at 5 different scenarios and do the math to determine whether it’s better to leave the money inside the company or withdraw instead.

          • Hi the case above..if working inside IR35… could we just “convert” the trading company into an investment company (by changing the SIC codes?) and invest through the LTD this way? I understand the disadvantage of losing the potential ER…but at retirement the money could be extracted as dividents year by year to minimise tax.

      105. Hummm , 1st set of idea’s i have seen collated in a logical way. Accountant resistance has been a drag on this idea for me. but i think i need to suck this and see. I have long wondered about group company structure with similar resistance, i see more clarity now, i think for the 1st time ever i may agree to share my email address

      106. Hi Michael,

        Great read, thanks for sharing!

        When talking to my accoutant, telling her want I want to do and asking different questions she said that they can help with setting up the investement company but would want to transfer that to a sister company as they are better equipped to handle everything 🙂

        If you could pass on the accountants details, I would really appreciated it.

        Thank you!

      107. Love the content and very useful even for a seasoned investor. I have 2 questions:

        Q1) I have downloaded your “pre-tax vs After-tax investment” google sheet and have a question regarding col D “Yearly Company gains”. Assuming the 11 yr investment horizon, stock & fund prices fluctuate year on year so does the accountant take this into consideration when you actualise/sell the stock or fund? i.e. you have simulated a linear 7% ROI year on year, in reality you could lose or make money in any year. So does the CT (19%) on profits, get recalculated in the relevant tax year. In investment world we may refer to this as cumulative performance vs discrete annual performance.

        Q2) One of the biggest advantages with opening a second limited company to invest is the ability to control your tax affairs. I am IT consultant so original holding company A would remain open until I stopped consulting, would you continue to use this holding company A to pay efficient salary/ dividend as highlighted in your article? If the answer is yes, does the new investment company B just snowball returns (assuming bull market continues) until consulting dries up or when investment company yield is large enough to be financial free? Explanation of exit options would be greatly appreciated, because one major down side with this approach is the potential loss of entrepreneurs relief (10%) if I were to close down holding company A, unless the inter company loan was paid back in full. I have experienced this with my property SPV, and many do not consider the exit option implications 10- 30 years later.

        Thanks in advance for reading.

      108. Hi Michael,
        Just what I was looking for. Thank you for this great article.

        Grateful if you would be able to send me details of an accountant that deals with limited company investments, my accountant has been pushing me back for over a year now not to take this route.

      109. Hi Michael

        Great articles and very good discussion led from it.

        I also read your article about Interactive Brokers and was very good too.

        my question is: what are the benefits for the second company (investment: properties and trading) being fully a separate entity to the first (main one registered for VAT) one VS the first one being the owner of the investment one?

        If the two companies are linked (first one owns second one and not the same person owning the two), then there will no need to set a loan. Also, the profit and losses can be shared?

        Any thoughts?


      110. Thanks for the excellent article and tons of good comments.
        My question on this topics has one big difference to most of the discussion – which is that I am looking to see if this will work between a person and their investment company rather than between 2 LTD companies.
        Assuming I have maxed ISA/Pensione etc as a high rate tax payer but have a 6 figure sum to invest in stocks/shares then is there an advantage to me doing this via set-up up a ltd and doing a standard Directors Loan versus me continuing to invest on my own name? The main advantages I can see are the ability to utilise other family members who are not HRT and then the ability to access the money via dividends etc once retired from work.
        I’m guessing that there is a turning point where the profits are large enough to offset having the company versus just using annual capital gains plus spouse etc.
        Just wondering if there has been any thought on an individual using your model rather than between 2 companies?

        • Very interesting use case, Haf. Although most people visit the blog because they own companies, your use case applies here too.

          Once you have maxed out ISA/SIPP/JISA and spouse too, then there is a good chance you can benefit from an investment LTD company. The biggest benefit is tax-sheltering your gain at 19% corp tax rather than 40%/45%. Also, the CGT allowance looks like an easy target if the gov decides to tackle the deficit.

          There are other LTD co benefits like how to structure it for inheritance planning and family payments if you have children. But it’s a longer discussion hence the 2 hourly sessions dedicated to that. You’ll have to weigh the pros/cons including the cost and hassle of running a limited company for investments!

      111. Hi Michael, thank you for this and the other posts you’ve made – really interesting and informative.

        I’ve just got one question – in the not too distant future, I’ll end up with ~75% of my portfolio (£750k) in Vanguard funds – they’re already ‘diversified’ but do I need to split across other providers?

        I’m thinking not, as it’s not ‘Vanguard’ I’m investing in, but the underlying fund, but would welcome your views as I can’t quite shake the feeling that I’ve too many eggs in one basket…. :S

        • Hey Dominic, Vanguard is a very well-known and well-run company. Having said that, as with any company out there, there is a (tiny) risk of them going bankrupt. In that case, your investments are not lost because they are held separately from Vanguard’s balance sheet. Even cash is not on their balance sheet but in a nominal account – that’s FCA regulation which is really good for UK investors.

          But there is an admin overhead if things go south so having multiple brokers reduces that (small) risk.

      112. Hi Michael,

        Can you please also share the good account detail? Separately, do you need license to trade investments via the investment company ltd? Like a FCA registration etc, is that exempt from regulated activity?

      113. I am having difficulty finding a broker that will open a corporate trading account – most do not. My personal broker, Saxo does allow corporate accounts but want a £100k initial deposit.

        Any ideas for other brokers who allow corporate accounts and don’t charge the earth?

      114. Hi Michael,

        I understand that if Company A invests more than 20% of t/over or profits then it becomes a CIC and one of the biggest losses to Directors is that their shares then lose Inheritance Tax (IHT) exemption. If Company A shares are to be handed down to family on death (which can happen anytime….) then the share value get taxed at 40%.

        So the idea of Company B is a great one for IHT purposes alone because the money invested is done by Company B which preserves the IHT exemption for Company A.

        Company B is still subject to IHT on death so the shares should be held on trust for the children or other beneficiaries so that there is no IHT.

        I hope this helps readers with another reason to set up Company B. 🙂


      115. Michael

        This is all very interesting.

        I have been investing surplus cash from my trading company for a while. In fact, I have been so successful that others have asked me to manage their personal money too. In that respect I am researching the best structure to use.

        My initial idea was to let others become shareholders in my limited investing company. They would be issued with shares pro-rata to the sum that they invest in the company. So if I had £900k in the company and they choose to invest £100k of their own capital, they get shares equivalent to 10% (equal to their £100k as a percentage of the total £1m).

        The money would then be invested in equities over the long term. Dividends received from equity investments are not subject to tax and so will be reinvested gross (better earning potential than reinvesting net dividends as an individual – compounded growth will be far greater).

        If any “investor” wishes to cash out then they simply sell their shares back to my limited company – this is achieved either by replacing them with a new investor or else selling down some of the portfolio investments in order to free up capital for the repurchase. The company and its remaining investors would continue.

        However, the issue here is that Corporation Tax would have been paid on gains crystallized by the company, and then CGT is payable on those gains once the investor cashes in his chips. So it would seem that there is a double taxation jeopardy here that I am trying to manage.

        Have you ever looked into pure “investment holding companies”?

        Are you able to offer any advice in that regard?



        • Hi James, investment holding companies are common but the setup you have described with multiple people joining/leaving the company is something I have no experience with. Not sure how it works in practice. Wouldn’t lending be another option in order to make accounting easier?

      116. Hi Michael,

        Fantastic post and great explorative insight! Really, you have produced something of real value to many in any area typically shrouded in fog!

        I’ve gone for the separate entity approach like you. I’ve only found one or two brokers whom will allow ltd securities investments though (I incidentally opted for II).

        Apparently though, the FSA (since 2018) require financial service providers (in this case it would be II) to have a record of the LEGAL ENTITY IDENTIFIER for any corporate or public entities trading financial securities (

        Just wondered if you had any experience with or knowledge about this




      117. Hi Michael,

        this is a great post, and thanks you for sharing. Fyi, I did ring up vanguard re. investing as a company and they pointed me to this website. For those interested, you can download the Application form under “UK Domiciled”.

        A few questions I had:

        I presume you have Vanguard, have you ever had to withdraw cash? I take it the funds needs to be > 100k.

        Only thing is 100k just seems to be a bit risky to put in one go, so considering using a platform like IB. Some are likening todays stock market to 1929 leading up to the Wall street crash, for e.g. lots of market debuts, speculators, record leverage, central bank keeping low interest rates and stocking up bonds etc. Wondered what your thoughts are investing at this time?

        • Good info, thanks NS. The initial investment has to be at least 100k GBP, then the top-ups can be £10k. Never had to withdraw so not sure.

          Regarding market sentiment, I think we are far from 1929. The common theme is that valuations are high and retail is heavily involved but that’s about it. The Fed back then responded with a totally different monetary policy. They increased rates and forced a more painful burst. The economy contracted and they kind of contributed to it.

          Today is a different environment. It doesn’t mean that stocks are less risky, they can still go down big. Valuations are quite high but that’s what we used to say 4 years back, and we’re here with record earnings and +30%, +40% more wealth despite brexit, covid, trump etc. Personally, I’m not sure when the next market crash is going to come. I keep investing each month with a sensible asset allocation, not just in stocks.

          Do I expect to get the historical double-digit returns from risky assets? Probably not though!

        • Hi Nehal, I have been using InvestEngine for a small portion of my investments in their personal investment accounts side. They also seem to have a DIY investment option now but not for Ltd companies ( I think). They are FCA regulated so should be fine to invest in. I am thinking of opening a business trading account with them as well. Did you open a business trading account with them? How did it go? Could you choose what to invest in with them on the business trading account or was it preset for you?

      118. Hi Michalel,

        Just wanted to start off by thanking you for all your work and advice on this page! As someone whose only recently set up a ltd company, this is the exact sort of page I have been looking for, and your advice has proved invaluable already.

        Just had one question regarding the frequency of loans possible to the investment ltd company. Is the loan something we can make every year? Or even every month?

        Thanks in advance for your time and help.

        • Hey Ali, yes, the company loans can be flexible. It’s one of the benefits this approach offers.

          Glad you found the article useful. Also have a look at the company investing course which describes the pros and cons of all structures in more detail, among other things. Especially if you are only starting out.

          • Thanks for the reply Michael. So I could technically make a loan every month?

            The course looks fantastic actually, how long will the recording of each session be available for as there will be some dates I am away?

            • Hey Ali, yes, you could lend every month and invest periodically – a strategy also known as dollar-cost averaging or pound-cost averaging if you prefer the British term 😉

              The course recordings are available to watch anytime after each session with no expiry date. Many people cannot commit to all live sessions and watch some of them offline in their own time.

      119. Hi Michael
        Thank you for this excellent article. I invest my limited company income (option 2 as per your article via a loan from my company) through interactive brokers mainly into shares and stocks.
        My question is regarding capital gain tax. My accountant stated that I need to pay capital gains tax (CGT) on unrealised gains even if I don’t sell any shares during a tax year . Is this correct?
        I was under the impression that you only pay CGT for net gains once shares are sold. For eg if I invest 10000£ into 10 different shares and valve of investment is 11000£ at the end of year, I pay CGT on 1000£ profit? Grateful for your thoughts. Thanks

      120. Hello Michael,
        Great article once again.
        How did you manage to transfer funds to the Interactive Brokers account?
        I added the standard sort code and account information provided by Interactive Brokers but the payment appears to fail.

        Did you have any issues transferring? I now need to call my bank (Metro) to get them to arrange a Wire transfer. (old school)

          • Hey Michael,

            I still had some issues with the transfer using Metro bank. They didn’t accept the details. I triple checked. In the end I opened a WISE account and then transferred the funds across.
            Good for a one off but I can’t seem to find a way to automate the recurring transactions on Wise so not great long term.
            Now to understand how to actually buy funds on the interactive brokers platform.


      121. Hi Michael,

        A great and informative article thanks.

        What would be perfect for me is if somehow I can use the “stuck” profits of Company ‘A’, to get loans to buy property, but do it diversified via property partners? Is that even possible?

        Kind Regards


        • Interesting perspective, Bryan. So you basically want to use your cash as collateral to get a loan and invest in property. Getting a BTL mortgage is very similar to this but the difference is that the loan is tied to a specific property. This way the lender can measure the risks. With a generic platform, like Property Partner, that offers a wide range of properties, I’m not sure which lenders would allow it, and at what rate. One option is to get a business loan for investment purposes but I’m not very familiar with that. Then there are online brokers that will happily give you a margin loan to invest in stocks and funds (like REITs) so that’s another possible route.

      122. Hi Michael awesome work and awesome page.

        You mention you invested in Property Partner as a limited company. You said: “the rent I receive in the form of dividends is tax-free!”. This is correct and known as “Franked Income”.

        My que:
        How is the rent received in the form of dividends? Is this exclusive to Property Partner and their structure? I have invested in some similar crowdfunding platforms (Yielders, Nester) but on enquiry they say their payments to me (on my investment) are “income” and not dividend income. Any idea what I am missing?

        • Hi Sully, this is because Property Partner investors are shareholders in SPVs that own the properties. Well, PP use a nominee to be exact, but still. As a result, the rent is distributed as dividends from the SPVs to the investors.

          Not sure how other platforms are structured. Why not ask them?

      123. Hi Michael,

        Great resources here and one day hope to sign up for your academy!

        Could you use the investment company for traditional BTL and also investing (ETFs)?

        I have read into it a bit and would need to have the company as a SPV which is a property only, but does this then prevent me from investing in ETFs? Or would I need to setup another company for ETF investing!

        hope makes sense



      124. Hi Michael,
        The article is great,
        It’s there any extra consequences writing off the loan?
        Do you still need to payback the loans when you close your trading company?


        • Hey Qiang, writing off the loan is possible but has to be done for valid reasons. It would have tax consequences, such as a loss on the balance sheet.
          A good accountant should be able to deal with it though, not a problem.
          Closing the trading company is a bigger story, which depends on a range of factors. We cover it in detail as part of the company investing course, including when having outstanding loans. Glad you liked the article and pls check it out!

      125. Hi Foxy,

        You say:

        “an added benefit of investing via a limited company is that the dividends received from stocks & shares and property partner are exempt from corporation tax. That’s a big plus.”

        Are dividends from VWRL or other UK domiciled ETFs free from corp tax? Or is it just UK shares?

        Thanks !

      126. How does this approach factor into the new CT changes in April 2023? For example, the ‘associated companies’ ruling and my profit being over £200k means that my trading company will be taxed at 25% anyway, so what’s the big benefit of doing this through a 2nd investment company? Other than just losing the right to BADR really.

        • Generally speaking, it’s a good practice to ring-fence your trading from your investment activity.

          Would you want your trading supplier going after your investments? Or your BTL mortgage bleeding into your trading company? You might have partners and other stakeholders that don’t agree with your (personal) investment strategy. Another reason is future planning if/when you want to sell your company. The buyers would probably want to buy your trading company shares but wouldn’t be interested in your index funds, crypto etc.

          Because company profiles differ, the answer really depends on each case. Having said that, investing directly through a trading company could be also perfectly fine if it works for you!

      127. In the case of company to company loans, what are the long-term implications of large (7 figures) of loans on the balance sheet of the trading company, which have no intention of being repaid? In an exit scenario, acquirers will not want to acquire a large balance sheet deficit.

        • spin off the trading company to a new wholly owned subsidiary, so that the trading company becomes holding company, then sell the trading company subsidiary?

      128. Great article, thanks for all the info. I have followed this approach and created a second ltd company to invest surplus cash from the operating company via a company loan.
        I’ve been doing the accounting myself. I have a question regarding the dividends received by the investment company (from LSE listed ETFs, that are tax exempt). Should they not be reported at all in the corporation tax return? Or should they be reported and then an adjustment made for the same amount so the net taxable amount is zero? (and if so, what should the adjustment account name be?)

          • It is a fundamental question though, underpinning the tax efficiency of investing via the LTD company (as dividends received are not taxed). You mention it twice, for stocks/ETFs and for dividends received from Property Partner.
            Does someone else know?
            Thanks in advance

            • To answer my own question, in case it helps someone else: dividends are entered separately from the trading profits in box 620 (Franked investment income/exempt ABGH distributions) of the CT600 form, and are excluded from the calculation of corporation tax payable.

      129. Hi
        As of 31 December 2023, my company has £200,000 (profit) in its account after paying £50,000 in corporation tax. However, I anticipate a significant increase in funds in July, with the balance expected to reach £600,000 due to regular income and low expenses.

        Given this situation, I am considering creating another Ltd to invest in property. My question is related to the transfer of funds from the first company to the new one. Should I transfer only the initial £200,000 (profit), or can I transfer the full £600,000? If the latter is possible, how would incorporation tax be calculated for the first company? Should the £600,000 be considered in the calculation, or not?
        Thank you

        • You can transfer any amount not just 200k in profits. But always consider your tax obligations, so you have enough left for paying HMRC, paying employees, VAT, etc.

          Corp tax in company A would be affected to some extent due to a) associated company rules and b) potential taxable interest on loan.

      130. Hi Michael, interesting read.

        When the investment company sells the shares/closes and claims entrepreneurs relief, doesn’t the loan still have to be repaid in full? So this would mean only the gains from the investments would benefit from the tax relief? As once the loan has been repaid, those funds will then need to be withdrawn as dividends so will still but subject to additional rate of 39.35%.

        Also how do you manage the loans if you want to loan more on an ongoing bases. Do you need to create legal agreements each time?


        • Hey J, the main purpose of the loan, or to put it better, the purpose of investing the company cash in general, is that it defers the tax while growing the pot.

          Later in life, when not on our tools anymore, our marginal tax is likely to be lower.

          Also not paying the tax upfront gives more options to the business investor. For example, starting a new business from a bigger pot, distributing wealth to family for tax efficiency etc.

          Loan agreements can be flexible. Either one in installments or separate ones.


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