- Jamie Flook
- 3 days ago
- 5 min read
Who this is for: UK business owners and directors with retained profits or rising cash balances
The question behind the question - "Should I leave money in my company or take it out?"
If profits are building up in your company, the real decision isn’t “what can I do with the money?”. It’s:
“Will leaving money in the company give me more flexibility later, or is it a mistake?”
Avoiding future regret is a powerful driver, and you're right to be thinking this way.
Plenty of sensible decisions can become less helpful over time if they’re not part of a joined‑up plan.
This article walks through the trade‑offs so you can choose with confidence.
The choice is less about products and more about control, paying less tax (and therefore keeping more of your money), and personal flexibility.
Quick summary (for scanners) - TL:DRers:
Leaving money in the company can be right if you need capital for growth or resilience, or you’re buying time for a decision.
Taking money out (dividends/salary/pensions) can improve personal flexibility, but needs to be done thoughtfully to avoid avoidable tax or locking funds away.
The best answer is usually a blend over time, reviewed as profits, goals, and risk change.
The biggest risk is inertia: doing sensible things in isolation and only realising years later that they limited your options. Inflation loves inertia. It eats it for breakfast, along with the purchasing power of your money.
If you want a quick sense-check of how joined up your approach is, try our free 5 minute tax-effiency check quiz.
We've designed the quiz to help you understand how tax-efficient you're being, both in the short-term and long-term.
It's not a sales quiz. There are no 'right' answers, it simply reviews how joined-up your tax planning and profit extraction are.
Try it here and get personalised results for what you should do next, plus get our free guide 'The Business Owner's Guide to Financial Independence'.
How to think about the decision (a simple framework)
Before tactics, step back. Every option trades three things:
Control & Access: How quickly and easily can you use the money if life changes?
Tax Over Time: Not just this year, over 5, 10, 20 years.
Concentration Risk: How much of your future depends on the business vs personal wealth?
Keep these three in mind as you read the options below.
Option 1: Leave the money in the company
✅ When this can work well
The business genuinely needs capital for growth, resilience, or a planned investment.
Your personal income needs are already covered, so there’s no pressure to extract.
The money has a defined purpose and is being reviewed intentionally (not by default).
⚠️ When it can cause problems later
Retained profits become the main long‑term wealth plan without a clear exit or extraction strategy.
Cash accumulates well beyond what the business needs, concentrating risk and underperforming after inflation.
Future tax on extraction hasn’t been modelled, and access/personal flexibility will matter more later.
Rule of thumb: Leaving money in is a temporary position, not a plan in itself.
Option 2: Keep profits in business deposit accounts to earn interest
✅ When this works well
Funds are short‑term or earmarked for a known business use.
Capital preservation and liquidity matter more than growth.
You view interest as a holding return, not a wealth strategy.
⚠️ When it can cause problems later
Large balances sit in cash for years with no plan.
Inflation outpaces interest after tax, eroding real value.
Cash becomes the default parking place, delaying more suitable long‑term planning.
Rule of thumb: Cash inside the company is a tool for timing, not a destination.
Option 3: Invest through the company
✅ When this works well
Surplus profits are genuinely long‑term, beyond operating needs.
Risk, access and tax implications are understood at the company level.
Company investing is one part of a broader, reviewed strategy.
⚠️ When it can cause problems later
Company investments become a proxy for personal wealth, restricting access.
Business changes force sales at a bad time, or tax treatment is misunderstood.
Exit/retirement implications haven’t been mapped.
Rule of thumb: Company investing can be effective, but it should never replace a personal financial plan.
Option 4: Take money out, especially via pension contributions
(This isn’t the only extraction route, but it’s often the most overlooked strategically.)
✅ When this works well
Pension contributions are used deliberately as part of long‑term wealth planning.
Allowances are planned, and contributions are coordinated with other extraction.
You want to reduce business dependency and build personal flexibility over time.
⚠️ When it can cause problems later
Decisions are driven only by tax relief, not suitability.
Too much wealth is locked away without considering access needs.
Contributions become habit, not a reviewed strategy as profits and goals change.
Rule of thumb: Pensions can be highly tax‑efficient. The true art is how much, how often, and in what context.
The most common pattern we see
Year 1–3: Leave money in the company “for now” → feels sensible
Year 3–6: Cash balances rise → start investing in the company or continue parking cash
Year 6–10: Personal wealth lags business success → flexibility and independence feel distant
Event: A change (health, opportunity, exit) → decisions under time pressure, tax and access collide
None of these steps are “wrong”. The issue is lack of coordination and review.
The goal isn’t perfection. It’s a joined‑up plan that preserves options as life and rules change.
In plain English: What most business owners actually want
It's relatively easy in both what we want and what we should do, it's 123:
Enough personal wealth outside the business to make work optional.
A tax position that is sensible now and robust later.
Confidence that today’s decisions won’t box them in, five or ten years from now.
That usually means a blend:
Some capital left in for stability and growth
Some personal extraction (including pensions)
Clear roles for cash, investing, and personal wealth
What now?
Read these articles related to this topic:
What should I do with my company profits?
5 Smart financial moves every UK business owner should make in 2026
Take the quiz here:
Or, if you want to talk to a (nice) human about your position and what you're trying to achieve, you can book in a time with us here:
Jamie is Lab Financial Planning Managing Director, and a Certified Financial Planner™.
He advises business owners to help with their tax-efficient financial planning, and ensuring that they and their family are well protected, in any scenario.
If you'd like to discuss your financial planning, why not get in touch to see if we can help?
Remember, there are no stupid questions. Everyone has a different level of knowledge about money and planning their finances. We speak in plain English to help take away the fear and empower you to use your money well.
You can drop Jamie an e-mail here: jamie@labfp.co.uk
Tax rates are based on the tax year 2025/26.
Regulatory note: Lab Financial Planning Limited is an Appointed Representative of ValidPath Ltd, authorised and regulated by the FCA. This blog is educational and does not constitute personal financial advice.
FAQs (drop‑downs / expandable sections)
Is it bad to leave too much money in my company?
Not inherently — but beyond what the business needs, it can increase concentration risk and defer (not eliminate) tax decisions.
Is taking money out always less tax‑efficient?
Not necessarily. Over a lifetime, well‑planned extraction (including pensions) can improve flexibility and total outcomes.
Should I invest inside the company or personally?
It depends on access needs, tax treatment, exit plans, and risk. The right answer is often both, with different roles.
How often should I review this?
At least annually, or when profits/strategy materially change. The aim is intentionality, not constant tinkering.
