Company funds of £250,000. What / where to invest?
Discussion
This is probably a nice problem to have, but I’d welcome the collective views of anyone who has any experience or ideas on what I can do.
I’ll obviously be speaking with my accountant before taking any action, but I first wanted to understand what options might be available to me, so that I can give some thought about how I might want to proceed.
The situation is that I run a “one man band” type of Limited Company offering professional consultancy services. The company continues to have a healthy turnover and bank balance, even taking into account the covid situation over the past 18 months.
The bank balance stands at circa £250,000, but it is not earning any interest at all, and with the inflationary pressures being experienced in the economy, I’m thinking of ways to put the money to better use, so that at the very least, the value is not eroded away by inflation, etc.
I’ve got no experience with investing, etc but I’ve been thinking of perhaps buying some gold bullion or starting a portfolio of shares, although I know that the values can go down as well as up, and I may not recoup the initial investment sum.
I’ve also thought about buying a BTL, but the management of tenants and all the agro & risks that go with this are not all that appealing.
What other ideas (sensible & legal) are there for what the company can do with the £250,000?
I’ll obviously be speaking with my accountant before taking any action, but I first wanted to understand what options might be available to me, so that I can give some thought about how I might want to proceed.
The situation is that I run a “one man band” type of Limited Company offering professional consultancy services. The company continues to have a healthy turnover and bank balance, even taking into account the covid situation over the past 18 months.
The bank balance stands at circa £250,000, but it is not earning any interest at all, and with the inflationary pressures being experienced in the economy, I’m thinking of ways to put the money to better use, so that at the very least, the value is not eroded away by inflation, etc.
I’ve got no experience with investing, etc but I’ve been thinking of perhaps buying some gold bullion or starting a portfolio of shares, although I know that the values can go down as well as up, and I may not recoup the initial investment sum.
I’ve also thought about buying a BTL, but the management of tenants and all the agro & risks that go with this are not all that appealing.
What other ideas (sensible & legal) are there for what the company can do with the £250,000?
One of the most tax efficient routes to extracting money from the business in your scenario, is to put it into a private pension. With the tax relief offered, you get a nice top up from the government, and you are free to allocate your pension as you see fit, whether it's in stocks, funds etc
Regarding investing, I have found the pandemic to be one of the most profitable years I've ever had. I started investing a bit later than I should have in 2020, but I'm up 100-400% on many stocks (mostly US, but some in Oz and HK too) - I am in the same boat as you (in terms of one man band), but I wish I had more cash to invest. It's an incredible time to buy.
When it comes to investing (and thinking 10 years plus), follow the money, a lot is being invested in emerging tech for the green economy, especially in Europe. The pandemic has made people realise the opportunities in biotech companies too.
Regarding investing, I have found the pandemic to be one of the most profitable years I've ever had. I started investing a bit later than I should have in 2020, but I'm up 100-400% on many stocks (mostly US, but some in Oz and HK too) - I am in the same boat as you (in terms of one man band), but I wish I had more cash to invest. It's an incredible time to buy.
When it comes to investing (and thinking 10 years plus), follow the money, a lot is being invested in emerging tech for the green economy, especially in Europe. The pandemic has made people realise the opportunities in biotech companies too.
Following as this also a topic that interests me.
One thing to consider if you haven't already, assuming your income comes from the company and you don't need the money on the balance sheet to pay creditors etc. is to max out your pension contributions (which then also reduces the Corp Tax you pay).
ETA: poster above beat me to it.
One thing to consider if you haven't already, assuming your income comes from the company and you don't need the money on the balance sheet to pay creditors etc. is to max out your pension contributions (which then also reduces the Corp Tax you pay).
ETA: poster above beat me to it.
Thanks for the initial replies.
To add some more background info; my pension contributions are already maxed out, and I'm drawing sufficient salary & dividends to comfortably pay the bills during the year.
The remaining bank balance is after all of the usual allowable funds have been extracted from the company, which is why I'm now thinking about what the company itself could do with the remaining money, rather than it just sitting in the bank doing nothing.
To add some more background info; my pension contributions are already maxed out, and I'm drawing sufficient salary & dividends to comfortably pay the bills during the year.
The remaining bank balance is after all of the usual allowable funds have been extracted from the company, which is why I'm now thinking about what the company itself could do with the remaining money, rather than it just sitting in the bank doing nothing.
whereabouts are you based?
if you're anywhere around coventry/leamington spa, warwick or stratford, then i wouldnt recommend BTL. terrible market, absolutely no money to be made here
if you're anywhere else in the country, i'd heartily recommend BTL. get a lettings agent to manage everything, and make sure they do their background/reference checks on potential tenants.
£250k would easily get you 4 deposits of £50k each and cover all the stamp duty, then i'd expect returns of about 10% after management fees and 20% tax - though you probably wouldnt even pay that if you buy them as a business.
if you're anywhere around coventry/leamington spa, warwick or stratford, then i wouldnt recommend BTL. terrible market, absolutely no money to be made here
if you're anywhere else in the country, i'd heartily recommend BTL. get a lettings agent to manage everything, and make sure they do their background/reference checks on potential tenants.
£250k would easily get you 4 deposits of £50k each and cover all the stamp duty, then i'd expect returns of about 10% after management fees and 20% tax - though you probably wouldnt even pay that if you buy them as a business.
85Carrera said:
Have you considered, or did they advice you on, the tax implications of that?
They didn’t advise me. My accountant said it was definitely an option and my brother in law does it on a massive a scaleYou pay tax at the corporation tax rate when you release the gains. It’s money the company doesn’t need and was making nothing in a Ltd company savings account
Very similar situation with my company last year so opened a GIA with Intelligent money after getting fed up with years of zero interest on a similar sum stuck with lloyds.
Thanks to the wonders of IM PHR Covid opportunities fund performance it made well over £50,000 in less than 6 months, happy days!
Thanks to the wonders of IM PHR Covid opportunities fund performance it made well over £50,000 in less than 6 months, happy days!
Mandat said:
Rufus Stone said:
Buy a property and rent it out?
This was a first thought I've had, but I'm put off by all of the risks and costs associated with landlord & tenant issues, non-payment of rent, repairs, scummy tenants, etc.forest172 said:
They didn’t advise me. My accountant said it was definitely an option and my brother in law does it on a massive a scale
You pay tax at the corporation tax rate when you release the gains. It’s money the company doesn’t need and was making nothing in a Ltd company savings account
Isn’t it important to know how much capital you can use for investing otherwise you could be categorised as an investment company? You pay tax at the corporation tax rate when you release the gains. It’s money the company doesn’t need and was making nothing in a Ltd company savings account
btdk5 said:
forest172 said:
They didn’t advise me. My accountant said it was definitely an option and my brother in law does it on a massive a scale
You pay tax at the corporation tax rate when you release the gains. It’s money the company doesn’t need and was making nothing in a Ltd company savings account
Isn’t it important to know how much capital you can use for investing otherwise you could be categorised as an investment company? You pay tax at the corporation tax rate when you release the gains. It’s money the company doesn’t need and was making nothing in a Ltd company savings account
Mandat said:
Thanks for the initial replies.
To add some more background info; my pension contributions are already maxed out, and I'm drawing sufficient salary & dividends to comfortably pay the bills during the year.
The remaining bank balance is after all of the usual allowable funds have been extracted from the company, which is why I'm now thinking about what the company itself could do with the remaining money, rather than it just sitting in the bank doing nothing.
For me it would depend on when you are planning on retiring, and what your plans are for extracting surplus funds. To add some more background info; my pension contributions are already maxed out, and I'm drawing sufficient salary & dividends to comfortably pay the bills during the year.
The remaining bank balance is after all of the usual allowable funds have been extracted from the company, which is why I'm now thinking about what the company itself could do with the remaining money, rather than it just sitting in the bank doing nothing.
When you say your pension contributions are maxed out, are you referring to personal contributions or the LTA?
Also depending on your pension situation and on how much you have actually drawn there is an argument for taking more dividends and then investing taxed income into ISA’s, and VCT’s have recently come up in my conversations, but I haven’t looked into them yet.
Depends on your plans / age / retirement etc.
Just be careful you do not become a investment company.
As you have said pensions maxed, salary dividends maxed. You can have a share portfolio, but as long as this does not become the main trade.
So for example, if say your consultancy turnover is £200k, I would not put full £250k into investments, as now yhour investment side is higher than yhour consultancy side (based on value).
BTL would not bother tbh especially with just one property in a limited company. You limit your mortgages etc by doing it through a limited company as well.
Just be careful you do not become a investment company.
As you have said pensions maxed, salary dividends maxed. You can have a share portfolio, but as long as this does not become the main trade.
So for example, if say your consultancy turnover is £200k, I would not put full £250k into investments, as now yhour investment side is higher than yhour consultancy side (based on value).
BTL would not bother tbh especially with just one property in a limited company. You limit your mortgages etc by doing it through a limited company as well.
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