Historically, it has never made sense for an individual to invest through a company vehicle like a limited company. However, with capital gains tax allowances being slashed, ISA lifetime contribution limits being suggested, dividend allowances decimated etc. I wonder if the calculation is changing, and in a few years, it will be advantageous for individuals that work through limited companies, such as consultants, builders and media workers, to invest through those companies rather than paying out the money and investing it personally.
The current state of company investment accounts is very much geared towards large companies. I am currently going through the process of creating an Interactive Brokers account for my limited company, and it is a complete mess. It is geared toward large companies, hedge funds, treasury managers etc. I am being asked questions that only apply to billion-dollar finance companies. I’ve been asked to apply for an LEI number which costs $160 + $90 per year and, as far as I can tell, only applies to companies that trade options in large quantities. I will not be trading options at all. I am also being asked many MIFID questions, which also do not really apply to my company.
If it is becoming tax efficient to invest through a limited company, I believe Freetrade is ideally placed in the market to offer a simple, cheap service geared toward small businesses so they can begin investing. I have no hope of this being implemented anytime soon, as the one feature limited company directors have been crying out for years is company contributions to SIPPs and is still unimplemented. However, I would like to get the conversation started, in particular, if anyone has opinions on whether this method of investing will be tax efficient in the near future.
They can’t offer employer contributions to SIPPs so this, whilst a great idea, can’t see happening any time soon
Good post regards to having a Ltd company trading, i will be keeping tabs on this thread.
A mate of mine suggested i should look into it. I cant really add any substance to this as yet due to me not doing any homework on it, but i shall in due course.
It has always made sense for individuals who work through their companies to do corporate investing.
The benefits of deferring tax on personal income, if you don’t need it, are massive.
But I agree. Limited company investing is not as straightforward as opening an ISA.
I am sure it will be very challenging for FreeTrade to implement. There’s MiFiD, different gross tax withholding to GIAs (IBKR do this very badly, but decent platform other than that), more onboarding checks on company stakeholders, to name a few.
I’ve asked FreeTrade for company investing since the very beginning as I am very active in this space with my blog, network, course etc.
There are so many things to consider.
You should also check out InvestEngine. Easy to use, low cost, friendly UI, good rep, but a very young company so there’s that.
Some companies have large surplus cash balances just sat doing nothing. If FT offered company accounts, what better way to use the cash.
Could I get a link to your blog here or in DM? I’m trying to get my head around how much more tax efficient it is currently. ISAs are a curve ball since they can shield a theoretically unlimited amount of tax.
@BlueSonic I know a few people with literally hundreds of thousands of pounds just sitting in their company bank account because it’s so difficult to do anything with it. If FT even just releases employer contributions for SIPPs, I believe you can carry back 3 years of contributions so £180k can be dumped straight into the SIPP.