Consultant asks:
My company bank account often has a fairly large credit balance in it because I have provided for my Corporation Tax and VAT. The interest it earns is pitiful. What can I do to make this cash work a little harder?
Acumenica answers:
First, what you absolutely should not do: Don’t be tempted to withdraw the money from the business account and put it in to your personal savings account. You’ll end up creating a Director’s Loan Account and possibly incurring a punitive tax charge.
The easiest, and least risky, option is to open a business savings account. Aldermore*, for example, are offering a 1-year fixed rate savings account to limited companies at 4.35%.
So, if you know roughly what your corporation tax bill is going to be a year in advance - you know that right? - you can stick it away and earn a nice wee lump of interest on it.
If you're not quite organised or confident enough to do that, there's also an instant access product offering 4.05%.
*Other banks are available and offer similar products. We are not recommending Aldermore, just using them as an example.
