Corporate investing: How to invest cash from your business

Corporate investing is a way to put your business’s surplus cash to good use. Instead of just holding all your cash in the bank, you can put some of it into investments to (hopefully) generate additional revenue.

Corporate investing can also help reduce your tax obligations in some circumstances.

Here’s your introduction to corporate investing.

What is corporate investing?

Corporate investing means putting your business's surplus cash into investments rather than holding it in a bank account or drawing it as income, with the potential to generate returns and reduce your tax bill.

It’s also a way to withdraw additional money from a company in a tax-efficient way, when it is not intended to be used as income.

Although a business owner can choose to pay themselves in dividends or through a salary, taking too much out of the business to simply sit in your bank account can result in a hefty tax bill.

Conversely, allowing profits to mount up in your business account means this money isn’t actively working for you or the company.

Withdrawing money to place into carefully considered investments can be a savvy decision.

Sometimes, re-investing cash into your business or distributing it among shareholders won’t be appropriate, making corporate investments an attractive option.

What are the advantages of corporate investing?

In recent years, corporation tax, which applies to all profits a business makes and returns on any investments, has risen sharply.

Tax rates for larger businesses increased to 25% in April 2023 from 19%. Smaller companies with profits of less than £50,000 pay a lower rate of 19%, with reliefs available for companies with profits between £50,000 and £250,000.

Investing profits can be an attractive option for owners of smaller companies to reduce their tax bill. While some choose tax-efficient vehicles like pensions for their excess profits, others choose the option of investing through their business.

Some of the other advantages include:

• Diversifying into other securities and assets to give your business multiple revenue streams

• Potentially generating more money that can be reinvested into your business

• Giving your surplus cash a chance  of significant growth, rather than leaving it in a savings account that pays a low rate of interest

What are the disadvantages of corporate investing?

When you invest in the stock market, it’s important to be aware that returns are not guaranteed. The value of your investments can fall, and rise over time.

Falling investment values could cause problems if you need access to cash and markets haven't recovered.

As such you need to have a clear idea of your attitude to risk and when you might need access to the money.

Running a company is, of course, inherently risky, so most successful CEOs tend to have a healthy understanding and tolerance of risk.

But corporate investing may not be suitable if you need instant access to your cash to bolster cash flow.

You may operate a business that’s seasonal or that doesn’t yet have a steady, consistent stream of clients, meaning tying your money up just isn’t practical.

It’s also not ideal if you’re planning to make significant investments in your business in the near future, for the same reason.

If access to cash is an issue for you, ensure that you retain sufficient funds in easy access accounts before investing any surplus.

It may also be wise not to lock away investments for too long, if you’re worried about cash flow.

Here's a quick summary of the main pros and cons of corporate investing:

What investment options are available for corporate investing?

The best investment vehicle will look different depending on a number of factors, including:

• How hands-on you’d like to be with your investments

• The level of returns you’re looking for

• How long you’re happy to invest for

• The sectors you choose to invest in

• Whether you’d like to explore alternative investments or stick to basic financial instruments

Here are just some of the most popular options:

• Funds: There are wide-ranging options like mutual funds (that allow you to invest in a portfolio of bonds, securities and stocks) and sector-specific vehicles like real estate funds.

• Investment trusts: You pool your money with other investors to invest broadly or in a specific sector/area of the market.

• Individual stocks: You could invest directly in another company or a number of companies if you believe they’ve got a bright future ahead.

• Bonds: Government bonds (like premium bonds) are considered a relatively safe investment, but you could also explore corporate bonds if you’re looking for higher returns.

• Commodities: Tangible products, like gold, precious metals or oil.

Although not strictly a corporate investment, it’s also possible to save tax as a business owner by paying more into your own pension through your company.

Employer pension contributions are tax deductible and will reduce your corporation tax bill, though you won’t be able to access your funds until you’re at least 55.

What tax considerations are there when doing corporate investing?

Companies will need to pay corporation tax on income and gains they receive from their investments.

The exact corporation tax payable will depend on what type of asset your business owns and the size of your company.

For example, micro-entities (meeting two of the following criteria - turnover of less than £1million, 10 or fewer employees and/or a balance sheet total of up to £500,000) will only have to pay tax on investments once they’re ‘realised’ – surrendered at least in part or sold on.

Meanwhile, other companies will be taxed on any ‘basic financial instrument’ (such as stocks, shares, bonds or options and futures contracts) investments once they’re realised.

If a company transfers an investment bond or mutual fund to an employee or director, it could also trigger a tax charge. The gain on any investment will attract corporation tax, and there may also be employers’ national insurance to pay on the transfer.

And if you’re thinking about estate planning when making corporate investments, you’ll need to consider if you qualify for business property relief, which currently allows qualifying business-related assets to be passed down tax-free after two years. 

However, it’s important to take advice because the rules are complex, and business property relief rules have changed. In April 2026, a new £2.5 million allowance was introduced, offering 100% relief; 50% relief will apply to assets over that threshold.

Do I need professional advice before investing?

Yes, corporate investing involves complex tax rules, so it's advisable to speak to an accountant or a financial adviser before committing any business funds.

An accountant or financial adviser can help you work out exactly how much tax you’ll be looking at paying on your revenue and profits.

Get expert financial advice

If you’re not familiar with investing, it’s also worth talking to a financial adviser.

A qualified financial adviser can help you gauge your appetite for risk (or how willing you are to lose any money you invest) and how long you’re happy to tie your money up for, before offering impartial advice.

A financial adviser who specialises in advising business owners can get you started with corporate investments. Your accountant may also be able to help.

If you found this article helpful, you might also find our articles on pension vs property investments and venture capital trusts informative, too.