Options for large amount of money in ltd company?

[b0redom]

Except you can't do your sums. It's:

3.3k X 12 months x 23 years = 910k before compound interest etc.

[Underbase]

Are you sure about that ? Unix says different:

39600*(1.05^23)
121632.34073434525055898000

I know that is taking the investment yearly instead of monthly, but even so. Seems more like 121k than 1.7 mil (?)


On topic, obviously the OP needs financial advice, preferably from several different IFAs. Personally I would take cash out and pay the tax, or leave it in and run the company doing something I like, being an entrepreneur for a bit. Start your own microsoft.

I think the point wasn't that you only put away the money in 1 year and wait 23 years, but instead you save the 3.3k every month for 23 years and get 5% interest. In which case it would look more like 1.64m (taking the interest yearly)

[unixman]

Except you can't do your sums. It's:

3.3k X 12 months x 23 years = 910k before compound interest etc.

Ah yes. I have given the figure for 1 years worth of investment left for 23 years. Blame unix.

I have to wonder a bit at the OP's life where he worked full time but was able to (and is still able to) ignore most of the income. Why work then? Also, I am in a similar situation myself, with much smaller numbers.

[Crossroads]

Because its never quite enough in the bank...

[WordIsBond]

Ah yes. I have given the figure for 1 years worth of investment left for 23 years. Blame unix.

Let me guess, your sector isn't finance.

[syrio]

4. Enterprise Investment Scheme tax relief.

I'm not quite sure how of the details of this option, but potentially I could take the money out as dividends over several years and put it into Enterprise Investment Schemes so I would get tax relief and end up paying virtually no tax on the withdrawals.

The company would be paying £100k in capital gains tax as in option 1 when company investments are sold as in option 1 (close the company)

The big downside of course is that the money is tied up in EIS for several years, and these are risky investments, so I may well lose money or be worse off than if I had just withdrawn the money, paid tax and invested it elsewhere.

I have some more info on the EIS scheme idea.

Firstly assume I am already withdrawing maximum the maximum amount tax efficiently via salary, dividends and SIPP contributions.

By investing £100k per year in EIS schemes (say £100k for the sake of this example), I can rollover an EIS every 3 years and this allows another £100k to be taken out the company every year without paying higher rate tax. I need only ever have a maximum of £300k invested in EIS schemes.

Works like this

Year 1: Withdraw an extra £100k dividend out of the company, invest it in an EIS. EIS gets 30% tax relief so no higher rate tax is due on the £100k dividend. (will change slightly when new dividend tax of 7.5% comes in)

Year 2: Withdraw an extra £100k dividend out of the company, invest it in an EIS etc.

Year 3: Withdraw an extra £100k dividend out of the company, invest it in an EIS etc.

After 3 years, things change a bit.

Year 4,5,6... etc: Withdraw an extra £100k out of the company. Cash in EIS investment from 3 years ago and re-invest it in another EIS. EIS gets 30% tax relief and there is no tax on capital gains.

Obviously EIS investments are illiquid and risky, but the suggestion is that I go for a lower risk scheme which tries to preserve the capital. Of course there are charges for the EIS, apparently 5% initial charge, plus a yearly 2% charge, plus 20% performance fees. The suggestion was that I would probably just get back roughly what I had put in. I'm not sure how much to trust this.

The obvious risk is that I lose money in the EIS scheme, or even just do much worse in the EIS scheme than I would do if I had take the money out and invested it normally.

I have little idea of how EIS schemes have performed in the past, so I will be doing a little research into this.

I don't know what I think about this idea yet.

Any thoughts?

[northernladuk]

I can't help thinking you are being driven by greed and are no planning for the worst. These can be high risk and should be a smallish percentage of your investment portfolio. I can't believe and IFA would advise you put your entire savings in to high risk 3 year ventures.

[syrio]

These can be high risk and should be a smallish percentage of your investment portfolio.

I agree, but I wouldn't be putting my entire portfolio in there. In the example given I would only have £300k invested in the EISs at any one time allowing £100k to be extracted per year. Of course I could choose to have less than that invested. Perhaps restricting EIS investments to 5% to 10% of my net worth for instance if I try this option.

I am aware that it is in the IFA's interest that I choose this route as they would be getting their share of the initial charge. Whereas if I choose to just keep my company running they get nothing. Obviously a conflict of interest.

Some good information on the downsides of EISs here: https://www.sensibleinvesting.tv/doc...25%20final.pdf

[syrio]

I thought I'd try to summarise the replies where people have expressed a preference or made a suggestion.

1. Close the company.

2 votes for this if ER is available.

2. Keep company running and keep extracting money via salary, dividends and SIPP.

3 votes for this

3. Move abroad to a country that doesn't tax foreign dividends and take all the money out as dividends.

1 for this

4. Enterprise Investment Scheme tax relief.
0 for this

[acritchlow]

investment manager?

Hi Syrio,

Apologies this is not an answer to your question but I wondered if you would mind giving me some advice on your investment strategy or if you used any particular investment company/manager to build up your 1.7mil account?

I'm relatively young to contracting but I'd like to get into the investment side of things.

Any help would be much appreciated!