Surplus cash investment

[perftractor]

Hi,

Hope you all are well.

I have been contracting for many years and have been taking salary and dividends. I also invest in SIPP every year but still got a surplus cash left. I used to have Business Savings accounts but inflation being jumped to ~10%, the 1 to 2 % savings rate is not going to save it.

I have been thinking of investing that surplus cash for a while and now seems to be the time to act on it.

This is what I have done so far.

• Spoke to my accountant regarding investing this money. He advised not to invest more than 10% of cash in the name of my main trading company (used for contracting). His suggestion was to open a dedicated investment company as it will have an appropriate SIC for stock investments, open a new bank account and set up a commercial loan agreement between two companies
• He also advised that they cannot manage a Ltd Company doing stock investments so asked to get another accountant for this
• I got another accountant to do the yearly submission only, opened another limited company for Stock Investments and opened a new business bank account with cashplus bank.

Questions

• Has anyone done any stock investments in the name of their trading limited company? If so, would be great if you share some insight please? (e.g. which broker/platform, what %age of company cash was/is invested etc.)
• How to decide the commercial loan interest rate? could it 0% considering I own both the companies? Searched options related to commercial loan interest rates and realized that my trading company will have to pay 20% income tax on the interest received so want to check if it can be avoided somehow. (On a loan of £200,000 and with a 5% interest, I would have to pay £2000 to the taxman.)
• Any other suggestions on stock investing via a limited company?

Thanks.

[Lance]

[*]Any other suggestions on stock investing via a limited company?

don't do it.....

That's all I got.
Just take the money, pay the tax, and get it sheltered in personal savings.
At the end of the day, if it makes more money in the company you still can't spend it and you have a bigger tax bill to get it out.
And whilst ThickLizzy is doing tax cuts, she's gone in 18 months and a potential £3T debt to pay will need some tax.

[ChimpMaster]

https://forums.contractoruk.com/acco...d-company.html

This guy did it and appears to have been very successful. He's not on the forum much but you could drop a PM and he might get an alert.

Personally, I didn't use company money for stock market investments. I did however set up another company for property and loan funds across to it so that we could buy property with the loaned £. It is straightforward if you are clued up and educated on taxation and finance in general - and of course have an accountant who can advise.

Inter-company loans can be at 0%, no issues there.

[northernladuk]

Something that nearly every contractor has asked themselves so it's been covered quite a lot.

Using the Google search method by typing <keywords> site:forums.contractoruk.com you get all the threads as shown below. I've used investement but you can narrow it down with more keywords.

https://www.google.com/search?q=inve...hrome&ie=UTF-8

[northernladuk]

https://forums.contractoruk.com/acco...d-company.html

This guy did it and appears to have been very successful. He's not on the forum much but you could drop a PM and he might get an alert.

Personally, I didn't use company money for stock market investments. I did however set up another company for property and loan funds across to it so that we could buy property with the loaned £. It is straightforward if you are clued up and educated on taxation and finance in general - and of course have an accountant who can advise.

Inter-company loans can be at 0%, no issues there.

With the global drop in share prices with a looming recession I don't think one guy doing well is really a benchmark for this being a good idea. I'd be virtually everyone that has done this has suffered some very significant loses in the last year so personally I'd think it would be madness to be considering it at this point. Or is it the perfect time to be doing it, who knows, but if you are happy to suffer the 50%+ losses some people have probably made then it's an option.

Seems an obvious warning but we've examples where people haven't. When you say surplus this must exclude your warchest and a significant chunk more. Although your warchest is profit in the account it's there for what might happen as soon as tomorrow. You need enough to cover you for 6 months to a year ready in the bank in case the worst happens. Sickness, out of contract, global downturn etc. Only the money above that is for investment.

You put it in to shares now, lose your gig and have to withdraw the money at a significant short term loss is going to sting hard.

[perftractor]

Thanks for replying Lance. I am still working and have no plans to close the ltd company. Withdrawing it right now will come with a huge tax bill. If I close the ltd company and take ER then I would have take a permanent job or an inside ir35 role which I am not keen on.

I can do nothing and inflation with eat it away. UK is unlikely to come out of recession anytime soon
Or
I can invest and grow and yes will pay more tax but I have more in hand as well to pay the tax

[perftractor]

With the global drop in share prices with a looming recession I don't think one guy doing well is really a benchmark for this being a good idea. I'd be virtually everyone that has done this has suffered some very significant loses in the last year so personally I'd think it would be madness to be considering it at this point. Or is it the perfect time to be doing it, who knows, but if you are happy to suffer the 50%+ losses some people have probably made then it's an option.

Seems an obvious warning but we've examples where people haven't. When you say surplus this must exclude your warchest and a significant chunk more. Although your warchest is profit in the account it's there for what might happen as soon as tomorrow. You need enough to cover you for 6 months to a year ready in the bank in case the worst happens. Sickness, out of contract, global downturn etc. Only the money above that is for investment.

You put it in to shares now, lose your gig and have to withdraw the money at a significant short term loss is going to sting hard.

Thanks for wise words northernladuk. I have been my managing SIPP for last 8 years and doing fine. Yep, the money is surplus so planning to invest it carefully as a regular investment. I am fine on the warchest front.

I did loose a chunk of money when started investing / trading shares and options many years ago as got carried away but learnt my lesson early. Not going to gamble this time :-)

[Lance]

one guy doing well

Superstar investor...
Like Neil Woodford.

Although at least Woodford could prove he'd done well at one point, as he wasn't an anonymous stranger on the internet (Scooterscot or whatever his name was).

[perftractor]

https://forums.contractoruk.com/acco...d-company.html

This guy did it and appears to have been very successful. He's not on the forum much but you could drop a PM and he might get an alert.

Personally, I didn't use company money for stock market investments. I did however set up another company for property and loan funds across to it so that we could buy property with the loaned £. It is straightforward if you are clued up and educated on taxation and finance in general - and of course have an accountant who can advise.

Inter-company loans can be at 0%, no issues there.

Thanks for replying ChimpMaster. I did look at the link before starting this new post.

The new ltd company I opened has SIC codes for both property and shares investing. I have the dropped the idea of investing in real estate at this time due to a all time high housing market and increasing interest rates.

I was curious about the inter-company loan and good to know that it can be at 0%. Did you draw a formal loan agreement between the companies?

[perftractor]

Superstar investor...
Like Neil Woodford.

Although at least Woodford could prove he'd done well at one point, as he wasn't an anonymous stranger on the internet (Scooterscot or whatever his name was).

These are guys are/were "pro" active investors. I do not have plans to hand over my money to someone else to invest and not looking for a 20 to 30% return year or year. I believe in passive investing and happy with anything between 5 to 10% annual return.