How to Manage your Cash Surplus for Your Limited Company

If you need to try and manage your cash surplus as a limited company, then this guide will tell you everything you need to know. That’s a great place to be in for a small business today!

The first point that you need to think about is how much cash you have to invest. Then, know what you are going to use the profits for.

It may be that you want to maximize your surplus so that you can start another company or so that you can simply grow the company that you have right now.

how to manage a cash surplus

Either way, as a limited company, it’s more than possible for you to make quality investment decisions that go on to benefit you for years to come.

It may be that you want to maximize your surplus so that you can start another company or so that you can simply grow the company that you have right now. #smallbusiness Click To Tweet

Utilize High-Interest Accounts

If you do not have any immediate plans to use the cash that you have, then you can easily put it into a high-interest account.

Normally it is possible for you to maximize the amount of interest you get. Simply agreeing to keep the funds in that account for a long period of time will maximize it.

This could be a year, or it could be longer. You should know though, that there is a penalty if you were to withdraw the money early.

Director’s Loan to Manage your Cash Surplus

This option is not usually advised, as you will face some potential tax liabilities. That being said, in certain circumstances, it’s more than possible for you to use it.

Director’s loans can be a short-term solution if you want to loan money. Beware there are some implications with your tax.

If you want to take things one step further, then it’s more than possible for you to invest in venture capital as well.

Distribute Dividends

Instead of retaining your company profits, you may want to try and declare them as a dividend. It’s advisable that you do this every tax year. That way you will be able to take your gross income for the year up to the basic rate. Sometimes a tax-free allowance will be given.

If your income surpasses a certain amount, then you may need to pay additional tax on the dividends. This stands at around 32.5%, but there are still some advantages to doing this.

distribute dividends with a surplus

However, if you suffer the additional tax now, you will be able to enjoy the benefits you get from your dividends. In addition, without having to worry about the tax that is due to be paid later.

Remember that dividends are only paid from profit and that the tax rate could fall.

However, if you suffer the additional tax now, you will be able to enjoy the benefits you get from your dividends. #smallbusiness Click To Tweet

Company Pension to Manage your Cash Surplus

If you are nearing the age of retirement, then it’s more than possible for you to make contributions directly into your fund. This could be done through a stakeholder scheme, or it could be done through a SIPP.

manage cash surplus near retirement

That being said, you have to make sure that you receive a full corporation tax relief in the year that this is paid. If you want to find out more about this, then it is always a good idea for you to sit down and talk with a tax advisor.

When you do, they can then work with you to make sure that you are comfortable with the entire process and that you are able to capitalize on the benefits.

Stocks and Shares

Do you want to try and earn more income for the company? If so, then you may want to look at stocks and shares. If this is the route that you plan on going down, then you need to make sure that you look into all of your options before you commit yourself to this strategy.

After all, there is an element of risk, and it is only a good idea for you to do this with the spare money you have.

Spare money is classed as being any cash that can be lost, in the unfortunate case of your investment taking a turn for the worst.

spare money in your pocket

Normally it is far more efficient for you to make any of your investments personally. The main reason for this is because you will get an annual exemption. This means that any of your capital gains are tax-free up until a certain amount.

It’s important to know that if you make the investment through your company, then you will not get an indexation allowance. This will increase the base cost of your investment, and it is usually a bad idea in general.

All in all, making an investment is a fantastic way for you to ensure that your company is going to make the most of the profit you bring in. This could even help you to take things to that next level.

Normally it is far more efficient for you to make any of your investments personally. The main reason for this is because you will get an annual exemption. #smallbiz Click To Tweet

In Conclusion

Do you have any excess cash from your small business? If so, I’d recommend talking to an accountant after reading the above ideas. It will help you better decide what is right for you and your business!

I’d love to hear your thoughts on how to manage your cash surplus. Have you grown your business from having a cash surplus?

Lisa loves helping others to thrive online through Social Media, Blogging, and SEO. What good is knowledge if you cannot share it with others? She has 30+ years of experience in marketing/advertising with 10 years of experience in content marketing, social media, blogging, and SEO. Check out her latest eBook "How to Tweet and Thrive on Twitter" now on Amazon.

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