Can I Purchase Investments like stocks and Funds in my Limited Company?
Yes. A limited company is a separate legal entity and as such is
entitled to purchase property subject to Directors and Shareholders
approval.
Below are the scenarios and taxation pitfalls in relation to purchasing investment
- Tax on Income generated from Investment income is 25%, this will rise to 40% should the profit remain in company for more than 18 months. If you extract the profit you will be liable to up to 52% tax on the income.
- The cost of the investments cannot be written off against Profits. Income generated to build up funds in the company will be subject to 12.5% Corporation tax (in some cases a surcharge of approx. 7% will apply), therefore you have already paid corporation tax on the amount that you have in the company
- Capital Gains Tax: Should you sell your Investments any profit you make from the sale will be subject to Capital gains tax within the company! On liquidation of company there may be a further charge to capital gains on the same money if it is still within the company.
Advantages of Purchasing Investments through limited Company
- It is easier to build up a fund within the company than it is personally, as Corporation tax is lower than Income tax.
- The tax rate on Income relating to investments generated is lower Company 25% (40%) v’s Personal 52%
Summary
We would advise that you weigh up your options carefully before deciding to purchase investments through your limited company, the short-term access to company cash needs to be balanced with the long-term tax implications. Should you wish to arrange a meeting with one of our advisors please contact
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