However you choose to invest money as a business owner depends on your aversion to personal risk. When you invest money through buying shares as a limited company (either your regular company, or through a separate investment company specifically set up for investing as part of your wider financial strategy), you reduce your personal financial risk considerably. Over investing as an individual, you’ll notice the following advantages:
- When you make corporate investments through limited company investing, shareholders enjoy better capital gains tax rates on profits made from selling shares
- If you lose money on an investment, then this loss can be offset against investment profits to better reflect the tax you ought to pay
- Dividends paid out to shareholders are taxed at lower rates than those received by personal investors
To invest money in shares as a limited company you’ll need to understand the stock market and protect your business related assets from risk by investing intelligently and diversifying your investment portfolio to increase company profits. Below, we can help guide you through how to invest in shares as a limited company and do it in the most tax efficient way.
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What Does Investing In Shares Mean?
When you invest in shares, you own part of a company’s stock alongside any other investors who have bought shares in that company. Essentially, you’re part owner and are therefore entitled to dividends paid out to you as a share of the company profits.
There are, however, potential risks, as investing can lead to losing money if the company you invest in performs poorly.
Why Invest In Shares Through Your Company?
When you invest through a limited company you increase your tax efficiency and reduce some of the personal risk you would otherwise face if you were investing as an individual. You can also take advantage of certain tax reliefs which could mean reduced tax paid overall – although you should be wary of your capital gains tax threshold if you are investing on a much smaller scale – as you can only earn £3,000 in capital gains tax free in the 2025-2026 tax year, before you’ll need to pay tax. For most companies, this will be exceeded, however.
When investing as a company, you can also draw funds down from the business to help with personal expenses and investments, which can help you personally.
As a company, your investments will be much easier to manage, but be aware that not all shareholders may be happy with how their money is being used. You don’t need a complete consensus when investing as the limited company, but a majority decision is required, which can make for faster decision making, but can also make you solely responsible should your investment go wrong, which could lead to some disgruntled shareholders, so be cautious.
How To Buy Shares In The UK
Before you jump right in, corporate investing should be part of a wider overall financial strategy, not something you just start on a whim.
If you’re ready, however, then either as an individual investor or company, you can buy shares online or through a stockbroker who understands the stock market on a deeper level and can offer some advice. It’s always wise to know the company you’re investing in and to understand that you may lose money if things don’t go as planned. That’s why investing in multiple revenue streams is usually a smart decision either as a trading company or an individual investor.
Ensure you liaise with investment experts if you’re new to investing. We understand that limited companies are often keen to invest their profits to prevent money from just sitting in cash bank accounts without earning anything for the business, but it’s always best to seek professional advice to ensure you’re investing intelligently and protecting your business as much as possible.
When Buying Shares Through A Limited Company
| 1: | Start by researching investment strategy and investment types. Get to know historically stable securities and get to know which opportunities are out there for you. Research any potential company you may invest in, and only invest if you’re confident in their ability to grow. |
| 2: | Speak to an independent financial adviser to get the best advice and review how much of your surplus cash you want to invest. |
| 3: | Discuss whether investing with your current company or setting up a new investment company is best for you. |
| 4: | Present any investment plan to partners and shareholders to keep everyone in the loop. |
| 5: | Use administrative executives and accountants to track your investments, leaving you to carry on with running your business. |
| 6: | Invest with a stockbroker or on an investment platform you trust. |
| 7: | Consider hiring a specific investment manager to handle this side of your business if investing works for you. |
Advantages Of Investing In Shares Through A Limited Company
Some of the advantages to investing through a limited company include:
Encourage Other Companies To Invest In Your Business
Investing can be a great way to bring eyes to your company, and others may choose to invest in your business too, only furthering your own success.
Dividends Pay Out
When the company you invest in performs well, you make a profit and this can be paid to you in dividends, giving your business a steady stream of investment income.
Buy And Sell Shares To Generate A Profit
Shares are smart short and long term investments, depending on the business you invest in. You can trade these shares to increase your profit even more after enjoying dividends for a while.
A Simple Form Of Investing
If you’re new to investing as a limited company, shares are a much more accessible form of investing compared to some others.
Protection
Registering as a limited company with HMRC provides you with limited liability insurance. That means your personal assets are protected as a separate entity from your business assets and investments. Even if you make a loss through your shares, your personal assets are protected here.
Reputation
When you make wise investment choices as a limited company you increase your business’ credibility and investment reputation, which can actually really help your own business regardless of whether your limited company is specifically set up for investment purposes or if it’s your regular company that you’re simply using to invest some of your profits.
An increased reputation can lead to investors being interested in your business, and even an increase in sales.
Having Access To Funds
When you invest as a limited company it’s actually much easier to access the money you have invested, either by cashing in and selling shares as they’re on the rise, or by using dividends to increase business cash flow. Either way it’s much easier to access cash as a business investor vs a personal investor.
Risks And Limitations Of Investing In Shares Through A Limited Company
There are always risks involved in investing, but the following are especially relevant here:
Investments Are Not Seen As Trading Expenses
Investments aren’t trading expenses, so they’re instead seen as an asset for your business, so you will need to pay tax on any shares you own and there will be no corporation tax relief for the investments you make. You can, however, record losses on shares against your investment profit, reducing tax you pay when shares perform poorly.
Taxed When You Sell
When you come to sell your shares, you will need to pay tax on any profits made.
Investment Should Not Be Your Main Trade
Whilst you can open up a trading and investment company if that’s what you’re truly interested in, it’s usually not wise to rely solely on investments for making money. Corporate investments are no less likely to be affected if the investment market crashes, so you’ll lose money and investing is never guaranteed. Most business owners will enjoy investments as a side stream, rather than your main form of income.
When You Make A Loss
Although you can offset your loss if certain shares perform poorly, you actually can’t offset it from your overall business profit, but rather your investment activity profits. This can become confusing and often necessitates that you work with investment accountants, which come with extra costs.
Extra Admin
When you invest through a limited company you have to carry out a lot of extra admin to keep track of all of the investments you have made and to show exactly where your company cash has gone for accounting and tax purposes. You’ll again, likely need to rely on an accountant for this, which will cost you more as a business. But it’s also to ensure that you’re aware of the admin being carried out too – this will ensure your investments are logged correctly and investment profits and losses are correctly monitored. Keeping precise and detailed records is necessary, but can be a hardship for some.
Tax Considerations When Investing Through A Limited Company
Taxation is everything in business, and even more so when you’re investing through your limited company. All investment income will be taxed at the main rate of 25% when paying tax on an investment profit that has been recently received, but this will increase to 40% if the investment stays in your business account for more than 18 months. To make the most money, you have to move quick, hence the need to track all of your investments carefully.
When selling your investment shares you can withdraw the income to a business bank account, but you will need to pay Capital Gains Tax on this profit. Speak to your tax adviser or accountant to ensure you know how much tax you’ll pay when you sell your investment shares.
What If I Have Shareholders In My Company?
With any limited company, you’ll still need to consult shareholders if you plan on investing their money in another company to earn extra cash for your business. This is often a wise idea, because experienced shareholders who have already invested in your company may be able to offer advice about any investments you’re planning on making.
Investing is never guaranteed to be successful. There are risks involved, and when those risks affect other people’s money you have to be careful. Make sure you’re as thorough with your research as possible and rely on professional advice where necessary.
Alternative Investment Options For Limited Company Owners
There are plenty of other investment opportunities that are worth considering if you think stock market investing isn’t right for you or your company.
Invest Through A Separate Company
It can be a good idea to set up a separate investment company – but only if you’re a confident stock market investor who knows the ins and outs of investing better than most. For many, earning through investments is a side income, not a main income for a new company. This can help minimise trading costs if you use loans to support your investments, providing you with a greater investment opportunity.
But this comes with its own risks, so speak to an investment expert and financial adviser before going ahead with this option.
Invest In Your Pension
When you own your own business it can be tempting to get lost in the now to ensure your business success, but don’t forget your future, too. By investing in your pension funds you receive corporation tax relief and can start building your pension pot by increasing pension contributions. And the plus side? There aren’t any risks here, because it’s just an investment in your future.
Re-invest In Your Company
If you have extra cash and higher profits than expected, then why not just reinvest that cash surplus in your company again? Maybe you can upgrade manufacturing processes and equipment or even spend money on training your staff further to guarantee future business success?
Property
Of all the investment vehicles available to you, property is one of the most reliable. You could purchase business property to save on rent, or even buy external properties to rent out to other businesses as another revenue stream for you. Purchasing property through your limited company is often an excellent idea.
FAQs
Am I legally able to invest in shares through my limited company?
Yes, you are legally allowed to invest in shares through your limited company, provided that the investments comply with all applicable laws and regulations.
Why do business owners invest in shares through their limited companies?
Business owners invest in shares through their limited companies as a way to diversify their portfolios and generate additional income without risking their personal assets. They can enjoy higher returns and less tax implications.
Conclusion
When you invest in stocks and shares through a limited company, you boost your revenue stream and increase the likelihood of further profits for your business, all without risking your personal finances.
It can prove to be a lucrative financial strategy for those companies willing to work with investment professionals to ensure they are investing in the right businesses. But remember that no investment is without risk, and although this method does protect you to a certain degree, you do risk upsetting shareholders or business partners if things go wrong.
Work with the right professionals, do your research, and ensure you invest wisely, however, and investing in shares through your limited company could prove to be a great success.
