A complete guide to investing as a business in the UK

Once your limited company starts doing what you always hoped it would do – generating a tidy profit – many directors eventually find themselves staring at the company bank balance thinking: there’s quite a lot of money sitting here doing absolutely nothing.

And that raises a perfectly sensible question: should you invest it?

Corporate investing – putting surplus company cash into investments rather than leaving it in the bank – can be a powerful way to grow your wealth. 

But it's also one of those areas where a good idea can become a bad one surprisingly quickly if you don't understand the rules first – or where to start with choosing investments and picking a broker.

Good news: in this guide, we'll run through absolutely everything you need to know, including the trickier rules that catch people out, and some of the most popular options for business investments.

Why invest limited company profits?

The very first question to address is: why would you consider investing excess company cash in the first place? After all, a lot of us associate investing with risk, and the idea of doing something unpredictable with money you've actually worked hard for doesn't exactly sound appealing.

To answer that question, we've got to think about the alternative – leaving your excess profits sitting in cash. 

Cash sounds safe because the number always stays the same. £10,000 in your company account untouched will still be £10,000 five years from now.

But the reality is that many business accounts earn little to no interest, meaning that cash is actually being eaten away by inflation. In fact, it's thought that SMEs in the UK have around £150 billion sitting in business current accounts right now earning zero interest whatsoever. 

Investing, on the other hand, comes with more risk (and no guarantees), but gives your money a much better shot at growing in real terms over time. 

As an example: leave £30,000 sitting in a bank account earning 0% interest, and at 2.5% inflation, after 10 years, its spending power would have reduced to around £23,500.

Put your money in something like a bond fund that generates 5% interest, and you'd end up with around £49,000, comfortably outpacing inflation – and with the smug glow of someone who made an excellent financial decision.

When should you invest limited company profits?

And as with most things in business (and unfortunately, in life) this is a call that comes down to one boring but incredibly important thing: tax efficiency.

The first step is making sure you understand how limited companies are taxed in the first place.

(If you know all this already and wish we'd just get to the investing bit already, skip here.)

The primary tax all limited companies will encounter is corporation tax. 

This tax is charged on your company's profits – that's your revenue, minus any allowable business expenses. Whatever's left after that calculation is what HMRC considers taxable.

The rates for 2025/26 are:

Annual profit	Corporation tax rate
Up to £50,000	19% (small profits rate)
£50,000-£250,000	19-25% (gradually increases)
Over £250,000	25% (main rate)

So if your company made £100,000 in profit this year, it would owe £19,000-£25,000 in Corporation Tax before you've paid yourself anything at all.

Once that tax bill is settled, the remaining money becomes available to distribute – which can be done through a combination of salary and dividends – and is exactly where your next set of potential taxes crop up.

• Salary works like any other job. You pay yourself a set amount each month, it goes through payroll, and you pay income tax and National Insurance on it in the usual way
• Dividends are different. Rather than paying yourself for your labour, you're distributing a share of the company's profits to yourself as a shareholder. 

This combination – a small salary, topped up with dividends – is the standard approach for the vast majority of limited company directors, and one that your accountant almost certainly suggested when you set it up.

The most tax-efficient director's salary is typically £12,570 per year. That's because it's the tax-free allowance, meaning no income tax is due on it at all.

Beyond that level, dividends are more tax-efficient than additional salary, because dividend tax rates are lower than income tax and National Insurance combined.

The first £500 of dividends per year is tax-free, but for the 2026/27 tax year, anything above that is taxed at:

• 10.75% if you're a basic rate taxpayer
• 35.75% if you're a higher rate taxpayer
• 39.35% if you're an additional rate taxpayer.

Compare that to salary: a higher rate taxpayer pays 40% income tax plus 2% employee National Insurance on earnings above £50,270 – and the company pays 15% employer National Insurance on top of that.  

All in all, here's what a tax-efficient combination of salary and dividends looks like for many limited company directors:

Income	Amount	Tax rate
Salary	£12,570	0% (covered by personal allowance)
First dividends	£500	0% (dividend allowance)
Further dividends	Up to £37,200	10.75% (basic rate)
Total	£50,270

Of course, that doesn't mean you should never take more money than this out of the business – sometimes you might need to and be happy to take the tax hit. 

But it's at this point that many limited company directors start to consider the best home for those excess profits still locked within the business.

Which brings us neatly to our next question…

Should I invest personally, or through my business?

Before rushing to open a company investment account, it's worth asking a simpler question first: is there a better home for this money that you haven't fully used yet?

For most limited company directors, the answer is yes – and it comes in the form of a pension or a stocks & shares ISA.

Option one: pension

Of all the ways a limited company director can use surplus cash, an employer pension contribution is usually the most tax-efficient. 

Rather than you personally paying into a pension from your own income, your company makes the contribution directly on your behalf. That payment is treated as a business expense – meaning it reduces the company's taxable profits before Corporation Tax is calculated. 

At the 25% main rate, a £10,000 pension contribution saves £2,500 in Corporation Tax. At the 19% small profits rate, it saves £1,900.

You can also avoid dividend tax, income tax, and National Insurance. 

Let's say your company has £30,000 of surplus cash sitting in the account. If it pays that £30,000 directly into your pension as an employer contribution, the full £30,000 lands in your pot. 

Compare that to taking it out as a dividend first. You'd pay 35.75% dividend tax as a higher rate taxpayer, leaving roughly £19,300 to invest. The pension route puts £10,700 more to work immediately, before a single investment decision has been made.

An obvious limitation is that you can't get your hands on your money until age 55, rising to age 57 from 2028. But for surplus cash you don't need for years, it's hard to beat.

Option two: stocks & shares ISA

If you've used your pension allowance, or you want more flexibility than a pension allows, a stocks & shares ISA is the next option worth considering.

Inside an ISA, you can contribute up to £20,000 per year, and everything grows completely free of tax. No tax on investment gains when you sell. No tax on dividends received. No tax when you take the money out. 

You can invest in the same ETFs, funds, and shares you'd hold anywhere else, and unlike a pension, you can access the money whenever you like.

The catch, as a limited company director, is getting the money into the ISA in the first place. ISAs are personal accounts, so your company can't pay into one directly. The money has to come out of the company as a dividend first, which means paying dividend tax on the way out.

Taking £20,000 out as a higher rate dividend means paying 35.75% tax – a bill of around £7,150 – leaving roughly £12,850 to put into the ISA. Alternatively, if you're within the basic rate band, you'd pay 10.75%, leaving £17,850 to invest.

So the question becomes: is it worth paying that dividend tax now, to get money into a permanently tax-free wrapper?

For basic rate taxpayers, the answer is almost always yes. The dividend tax bill is relatively modest, and the long-term benefit of tax-free growth inside an ISA is significant.

For higher rate taxpayers it's less clear-cut, as a larger chunk goes to HMRC upfront. 

At 35.75% dividend tax, you're handing over more than a third of the money just to move it from one account to another, before it's even invested. Whether the long-term tax-free growth inside the ISA justifies that upfront cost depends on how long you plan to leave the money invested and how much you're putting in.

Speaking to a professional in these circumstances to get some proper advice can be worth its weight in gold. If you're looking for help, get in touch with our sister company Most for a free consultation.

What tax do I pay when investing through my limited company?

Once you've exhausted your pension allowance and your ISA allowance – or the money simply needs to stay inside the business – investing through the company itself becomes the natural next step.

Rather than taking the money out and paying dividend tax first, the company opens an investment account and invests the surplus cash directly. 

But – unfortunately – that doesn't mean the tax disappears. It just comes later, and in a different form. 

While it's invested: any gains made when investments are sold are subject to Corporation Tax at 19-25%. There's no annual tax-free allowance on gains for companies, unlike the £3,000 capital gains allowance individuals get. On the plus side, any dividend income the company receives from its investments is generally exempt from Corporation Tax, so if your funds pay out dividends, those land in the company tax-free.

When you eventually take it out personally: dividend tax applies at that point, just as it would if you'd taken the money out today.

So the full tax journey for company-invested money looks something like this:

Stage	Tax
Company earns profit	Corporation tax (19-25%)
Company invests surplus	Nothing yet
Investments grow and are sold	Corporation tax on gains (19-25%)
You take the money out personally	Dividend tax (up to 37.75%)

Complicated? Yes, but remember that when you invest through the company, you're investing post-Corporation Tax profits before you've paid any personal tax. That means a larger sum gets invested from day one compared to taking the money out first and paying dividend tax before investing.

Let's say you take the £30,000 personally as a higher-rate dividend first – you're investing around £19,300 after tax. Compare that to leaving it in the company and investing it there, and the full £30,000 goes to work. That's £10,700 more compounding from day one.

One extra – very important – thing to keep in mind here is that we're talking about investing excess cash that's been generated from regular business activities. 

If investment activity starts to outweigh your actual trading, HMRC can actually reclassify your company as a Close Investment Holding Company, which is bad news. In short, it means losing access to the 19% small profits rate and paying 25% Corporation Tax on everything. 

Some directors in this position actually choose to separate trading and investing into two companies – though this obviously adds complexity, so it's worth getting proper financial and accounting advice if you're considering it.

What does HMRC actually say?

“A close company will be a CIC if it does not exist wholly or mainly for the purpose of trading commercially or investing in land for (unconnected) letting or acting as a holding or service company within a group which exists wholly or mainly to trade or invest in land for letting.”

A couple of other things to keep in mind, too:

• Investments are assets, not expenses. When your company buys an investment, it doesn't count as a business expense like a laptop or a software subscription would. Instead it sits on your company's balance sheet as an asset until you sell it, meaning it won't reduce your Corporation Tax bill in the way that normal business costs do
• Investment losses can't offset trading profits. If an investment falls in value and you sell at a loss, you can't use that loss to reduce your company's trading profits and lower your Corporation Tax bill. Investment losses can only be offset against investment gains – they can be carried forward to future years, but they're ring-fenced from the rest of the business.

How to invest through your limited company

Now all that's out the way, onto the good stuff: how do you actually invest? 

Let's go through it, step-by-step. 

Step one: get a Legal Entity Identifier

One of the first things you'll need to do is get a Legal Entity Identifier – or LEI – as you'll need to provide this to any platform you invest with.  

This is essentially a registration number for your company as a financial participant, required under UK financial regulation. This typically costs around £60, and has to be renewed every year. 

The LEI system is overseen by a global body called GLEIF (the Global Legal Entity Identifier Foundation), and only organisations accredited by them are authorised to issue LEIs. Good glief, that's a mouthful. 

One well-known option in the UK is the London Stock Exchange, which operates as an accredited LEI issuer through LSEG. 

If you choose to open a business account through InvestEngine – a popular provider that allows business investing – they'll actually give you an LEI free of charge for the first year. More on them coming up shortly.

Step two: decide what to invest in

Deciding what you want to invest in before you choose who you want to invest with is a smart move, because not all providers offer all types of investments. 

A big part of this is thinking about what you actually want your money to do. 

Not every business owner investing surplus cash wants to put it all in the stock market – some directors just want their cash working harder than a current account allows, without taking on much risk. Others are happy to invest for the long term and accept more volatility in exchange for the potential for higher returns.

Some popular options for business funds are:  

Money market funds: the low-risk starting point. A money market fund is a low-risk investment that gives you a place to hold your savings, while aiming to give you a slightly higher return than cash. Instead of investing in bonds or shares, it invests in short-term debt from governments, banks and companies with strong credit ratings. 

They're not entirely risk-free, and returns will fall as interest rates come down, but for cash you don't want to expose to stock market fluctuations, they're a sensible step up from doing nothing.

Government bonds (gilts) – steady income, slightly more risk. UK government bonds – known as gilts – are loans to the government that pay a fixed rate of interest over a set period.

They're considered very low-risk as the government is unlikely to default, and can offer slightly better returns than money market funds over the medium term, though their value can fluctuate if interest rates move. You can also access these through a gilt ETF or bond fund without buying individual bonds directly.

Diversified bond funds – a middle ground. These funds hold a mix of government and corporate bonds across different maturities and geographies. More diversified than a single gilt fund, and typically offering slightly higher returns in exchange for slightly more risk. A reasonable option for directors who want more than cash returns but aren't ready for full equity exposure.

Global equity ETFs – higher risk, higher potential return. For surplus cash with a genuinely long time horizon – think five years minimum, ideally even longer – a broad global equity ETF gives your money exposure to thousands of companies across dozens of countries in a single fund.

Historically, this has produced the strongest long-term returns, but the value can (and does) fluctuate significantly in the short term. Not suitable for money you might need back in a hurry – like for that VAT bill you could’ve sworn you already paid. 

Many directors end up with a combination of the above; perhaps a money market fund for cash they might need within a year or two, and a global equity fund for longer-term surplus. There's no rule that says you have to pick just one.

Read more: How to invest in ETFs as a business

Step three: choose a broker

Next, you'll need to decide which platform should be the beneficiary of your hard-earned cash. 

This isn't as straightforward as you might imagine, as not all investing platforms offer business investing accounts – and some that do charge hefty fees. 

Here's a rundown of three of the best value platforms for businesses, in our opinion:

InvestEngine's business account charges no fees or trading commissions. It's an ETF-only platform, meaning there's no option to invest in things like mutual funds, shares, bonds or gilts, but there's a good selection of bond and money market ETFs.

All funds are available to buy fractionally, meaning you only need enough for part of a share instead of a whole unit. You'll get a free LEI for the first year, too, which will be automatically applied once you’ve funded your account with a minimum of £100. 

Lightyear is another platform that allows businesses to invest and charges no account or trading commissions for funds – but you must already hold a personal account with Lightyear first.

You'll find a choice of stocks, ETFs, and a small selection of money market mutual funds. Almost all funds are available to buy fractionally, but no GBP-listed shares are currently. Lightyear business accounts have an FX fee of 0.35%, with a £1 fee if you're trading shares. There's no minimum deposit requirement.

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AJ Bell is a pricier option, but one might be worth it to many due to their huge investment menu and long-established reputation.

You can choose from shares, ETFs, mutual funds, bonds, gilts and more. Shares, bonds, and gilts are capped at £3.50 per month plus dealing fees, with other investments charged at 0.25% up to £250,000, and FX fees charged in tiers starting at 0.75%. £100 minimum deposit required to open an account.

Platform	Fees and costs	Investment options	Minimum deposit	Customer service
InvestEngine	No account or trading fees; all funds are GBP-listed so no FX fees apply	ETF-only platform – includes bond and money market ETFs	£100 with free Legal Entity Identifier, £100 to open a portfolio, £1 per ETF order	Online support only
Lightyear	No account fees or trading fees for funds; trading fees of £1 per share order, 0.35% FX fee	Wide selection of shares and ETFs, small selection of bonds and money market mutual funds	£1	Online support only
AJ Bell	Shares, ETFs, bonds and gilts capped at £3.50/month; tiered charges for mutual funds starting at 0.25% up to £250,000. Trading fees reduced to £1.50 with regular investing; tiered FX fees starting at 0.75%.	Largest investment menu including shares, ETFs, bonds, gilts, mutual funds and investment trusts	£100	Telephone and online support

These are our top picks, but there are other platforms that offer business accounts you might also want to consider:

• Interactive Brokers charges an activity fee of only £3 per month, plus trading fees – but this can be pricier than some for smaller balances, and the platform itself is quite complex and more geared towards serious traders
• Interactive Investor has just as broad an investment range as AJ Bell with the same stellar reputation – however, they charge an additional £30 per month for business accounts, making them far more expensive than other options on the market.

Step four: open an account

Each platform will differ slightly in how you set up a business investment account. 

For example, InvestEngine and Lightyear both let you apply entirely online and will guide you through the process – verifying your details and getting your account up and running typically only takes a couple of business days. Refreshingly straightforward.

AJ Bell is a different story. Their limited company account still requires a paper application form, signed by the relevant directors, and posted back to their Manchester office. It's a bit more faff, but it's a one-time job, and their team is on hand to help if you get stuck.

Whichever platform you choose, most will ask for some combination of:

• Your company registration number
• Certificate of incorporation
• Proof of the company's registered address
• ID verification for all directors and anyone with significant control – usually anyone owning 25% or more of shares
• A recent company bank statement.

Have these ready before you start, and the process is usually fairly painless.

Step five: don't forget to tell your accountant

Investments sitting inside your company add a small but fiddly layer of complexity to your annual accounts. 

Any gains from selling investments need to be reported on your Corporation Tax return. Dividend income received needs to be recorded correctly, and the investments themselves need to sit on your balance sheet as assets, updated each year to reflect their current value.

Give them a heads-up when you open the account, let them know what you're investing in, and make sure you keep a record of any transactions you make throughout the year. Most investment platforms will provide a statement you can hand straight over, which makes the whole process fairly painless.

Bottom line

Investing through your limited company isn't for everyone – and it certainly isn't the first thing to reach for. Max out your pension contributions, consider your ISA allowance, and make sure your business has enough cash to actually run before a penny goes anywhere near an investment account.

But if you've done all that and there's still money sitting in your company account doing nothing, leaving it there isn't the safe option it might appear. Inflation is patient, and doesn't care that you're busy.

The good news is that corporate investing is more accessible than it used to be. Platforms like InvestEngine and Lightyear have made it genuinely straightforward to get started, the tax rules – while fiddly – are manageable with a decent accountant in your corner, and even a modest portfolio of low-cost ETFs or a money market fund is vastly better than another year of watching your cash quietly lose value.

The hardest part, as with most things in investing, is just getting started.

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