Can anyone calculate percentages better than me please?

[organicbox]

This year I will have a decent chunk of money in my business account, and the only way to take it out would be to pay 40 percent tax on it (because I’ve already paid myself up to the threshold this year) should I:

A, leave it in the business, so if I have a lean year I can use it to pay myself at a lower tax rate

B, pay 40 percent tax on it, and use it to pay off a chunk of my 5 percent mortgage?

(I really want to make a dent in my mortgage- if it’s not a stupid thing to do)

Ie - overall, will I save more money if I pay 40 percent tax to pay off a chunk of a 5 percent mortgage, OR is it more cost effective to keep paying the mortgage and leave the money on a lower rate of tax over time?

Does this question even make sense?

That's awful advice, he's just added to the complexity.

Can I say that I also run a limited company and depending on your age pensions are one of the best ways of getting money out and reducing taxes, but then I'm closer to 50 so it makes sense for me to draw lump sums.

I'd be leaving the 50k in the business but find a higher intrest account to deposit into. I'm with starling as well and I'm sure they have business savings accounts.

@organicbox just think of the lockdowns and what happened there! while the govt paid the staff, the business still had to pay the employees tax and NI. if the business did not have enough in accounts to pay this then they would go under. that is why the banks made big loans available to business. this ultimately meant many businesses went under because they did not have enough time to get back on their feet before the loan period finished and high interest started. you must always keep a good amount in bank! My hubby always keeps 100k in account just to be on safe side and it did help him sail through the lockdowns/ bank account went down to 60k but slowly getting it back up again. If there was another lockdown would your business survive with the money you have in bank

A) capital gains tax
B) corporation tax

My ex neighbour used a company mortgage to buy her property and then could t sell it without being liable for more tax than she was prepared to pay. She got herself into a terrible mess and took it out on her neighbours. We’re only ex neighbours because WE moved away.

Yeah, a great idea for your advisor to get lots of fees from you to manage the compliance implications.

It’s one of those structures that might make sense on paper, but I wouldn’t recommend to anyone who is just looking for an easy life with their finances.

Find another accountant.

Mad busy day but super grateful for replies and I will answer properly tomorrow.
Thank you

Thank you all for the input. Your points have given me a lot to think about. I think it's still worth considering because the reasons think it's a bad idea fall within risk, tax liability, and complexity.

Risk
I may not have been clear, but the house I would be selling to the business is not my home, it's a rental property on a buy to let mortgage that has a long term tenant. So I'm not risking my home.

The risk of the business doing badly and resulting in a repossession is minimal. I don't have staff, or significant suppliers, basically I provide a service, I bill, and I pay myself. If work stops for some reason I just stop paying myself, so the business wouldn't go under. The rental income will cover the mortgage payments- it's v desirable and has never been empty.

Am I missing something here? I suppose the company mortgage might be higher than the one I currently have, but so long as rent covers mortgage and a bit of maintenance it's fine?

Tax liability
Am I right in thinking, if I sell the property to my business, I personally will have to pay capital gains on the profit between when I bought it, and when I sell it to the company?

This might be worth it. Because of my company is paying the mortgage n the property, that money is coming out the company as a business expense, so avoiding 40% personal income, AND bringing down corporation tax liability? This would be for 20th years so quite a saving. Again, I don't think well in numbers or systems, so if I'm not getting it, I'd be glad to know.

Complexity
Yes. It's definitely more complex. But does that means it's a bad idea?
I'd anyone has the time to detail the nuances I'd be keen to know.

Thanks again x

Will look up SIPP now, I don't know what that is.

Tax liability
Am I right in thinking, if I sell the property to my business, I personally will have to pay capital gains on the profit between when I bought it, and when I sell it to the company?
yes
The company would also have to pay stamp duty.

Because of my company is paying the mortgage n the property, that money is coming out the company as a business expense, so avoiding 40% personal income, AND bringing down corporation tax liability?
The company would only get tax relief on the interest element of the mortgage.

It may well be worthwhile for a rental property, it depends the various figures.

@Chasingsquirrels
Thank you, I will start finding out the actual figures.
Really appreciate this conversation!