Thanks for this article Michael, very insightful.

I agree with Paul that it’s great if you don’t plan to grow your gains from investing through the stocks and shares ISA.

The best scenarios would be if you’re thinking on claiming entrepreneur’s relief in a few years or selling assets (property, crypto, etc). Then the gains from these could be deposited into the ISA, perhaps even fully, without having to open a conventional investing account which has capital gains tax.

Yeah thanks Michael.

Hey Pete, thanks for sharing this update from your accountant. Glad you liked the article!

Cheers,
Michael

Great shout Michael. I already knew you could do this with a flexible ISA but I never thought to use a Directors loan to do it!

My accountant has already confirmed that there would be no BIK or interest due as the loan would be outstanding for less than a month (using the average method).

Hi Colin, yeah it’s a bit tricky let me try to clarify it.

Before the end of year 2 (by April 5th) you’d need to add back £40k to keep your £40k allowance of 2 years.

So for year 5, assuming the ISA is empty and has not missed any of the previous allowances, it would require a £100k deposit on April 5th (end) to keep the £100k cumulative allowance going.

All scenarios assume you have withdrawn the entire amount every year, which is why you need to add it back in PLUS the new deposit. If on the other hand you don’t take any deposit out, you wouldn’t need to replenish it at year end. For example, say you already have £80k inside the ISA when entering year 5 and have not withdrawn it. Then you’d only need to add the current tax year allowance (new £20k) to have a £100k allowance when next tax year starts.

I hope that clarifies the situation. Let me know if not!

Great article , thanks for that. But can you just clarify that 5 year example for years 2-5 in more detail.

Happy with what is going on in year 1.

Before the end of year 2 (5th April) would you need to add back in £40K or £20K to have the cumulative ISA allowance of 2 years = £40K ?

And by extension, for year 5 , would you be adding just £20K again or the full £100K ?

I am trying to understand the cash flow requirement here to keep the cumulative allowance locked in ?

Thanks

Hey Hits, you would need to deposit the cash before tax-year-end for the allowance to continue into the next tax year. Glad you found the answer already, sorry it took me a while to come back to you. All the best with your ISA!

Thank you. May be worth running some example opportunity costs numbers at some point

Welcome Harry. Taxes are now higher – regardless of associated companies. For example, a company with £100,000 taxable profits has a 22.75% blended corporation tax rate. On £150,000, that’s 24%! Almost as high as 25% which is the upper limit.

Holding companies count as Associated companies and cannot benefit from the Small Profits Rate of corporation tax. An exception holds if the holding company does not carry a trade or a business and has no other assets than the subsidiaries. Also see this post from 2023: https://www.foxymonkey.com/corporation-tax/