Reply to: Surplus cash investment

[ChimpMaster]

It's almost the right time. So it's a good time to prepare. Major markets are in their 3rd leg of 10%+ falls from all-time highs, which historically has signalled the end of downturn in stock markets. The current 3rd leg is at 10% now but could very well (likely) extend further - US markets fell 37% in their final 3rd leg in the early 70s. In the early 80s the 3 legs were -20%, -15% and -14% within 18 months and then the subsequent 18 months saw a 70% rise in values.

Markets always climb a wall of worry. I've failed A LOT of times in stock markets to have learned this. I might fail again, but in the past 3 months I'm up 6+ figures on spreadbets shorting the markets. I'm still short but not comfortably now. There will be a turning point within the next 6 months, before it's obvious and well before the rate hikes are done. Peak interest rates will occur in early/mid 2023, markets will turn before this.

Likely turning point reached.

[syrio]

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.

Yes, that was me.

I don't know anything about using a separate limited company, but if it means you can get ER / BADR on the money held in your company and avoid any future tax pitfalls of being a CIHC then it sounds worthwhile. But I suppose it depends on how much money you can get the relief on, if you put all your cash in your investing company then the relief on the assets in your original company won't amount to much and you have the extra costs and hassle of running two companies.

It also depends how much you have and how long you want to have it invested for and when you are thinking of retiring. If the sum isn't huge and isn't likely to become huge before you retire then maybe you can keep your company running over a few years while you withdraw the money tax efficiently with salary, dividends and SIPPs. In that case I don't see a huge benefit in having the second company. At the other extreme when you end up with large amounts of money in the company, the separate investment company will seem like a more worthwhile option.

Originally I used Selftrade (now EQi) as a broker, then I switched to Hargreaves Lansdown. I think Interactive Investor will also do limited company accounts. HL have been pretty good, they are expensive for holding OEICs or Unit Trusts, so don't do that, but are fine for holding shares or ETFs.

[TheGreenBastard]

How did you the fund the separate ltd? did you draw an agreement and what loan rate did you go for? Accountant of my primary ltd co is not keen on 0%. His suggestion was to go for BOE base rate + 2% which I am not keen on as it would draw 20% income tax on it.

I do have savings account in Aldermore, redwood, investec and virgin but interest rates are not great.

My plan is open a business investment account with InvestEngine and invest purely in non-ftse ETF's regularly to absorb any downturn in the stock market and add a chunck if it drops. II charges £40 per month plus trading charges so not keen on that. Also looked at IB and HL.

Can I ask what platform do you use for stocks investment vis ltd company.

As other's have alluded to, 0% inter company loan.

InvestEngine looks OK, but I'm with II, their fund selection meets my requirements, IE doesn't. My pattern of trading on II is round robin a selection of funds each month with a % of surplus cash, this way the trade is free (you get a free trade per month).

[ChimpMaster]

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.

It's almost the right time. So it's a good time to prepare. Major markets are in their 3rd leg of 10%+ falls from all-time highs, which historically has signalled the end of downturn in stock markets. The current 3rd leg is at 10% now but could very well (likely) extend further - US markets fell 37% in their final 3rd leg in the early 70s. In the early 80s the 3 legs were -20%, -15% and -14% within 18 months and then the subsequent 18 months saw a 70% rise in values.

Markets always climb a wall of worry. I've failed A LOT of times in stock markets to have learned this. I might fail again, but in the past 3 months I'm up 6+ figures on spreadbets shorting the markets. I'm still short but not comfortably now. There will be a turning point within the next 6 months, before it's obvious and well before the rate hikes are done. Peak interest rates will occur in early/mid 2023, markets will turn before this.

[ChimpMaster]

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?

Yes

[perftractor]

I'd say I operate on the riskier side of things, my company capital is split roughly:

- Corporate crypto account, 5% (pure gamble but I wanted some exposure, my accountant doesn't like me, especially now with "staking" income)
- 25% BTL properties (in a separate Ltd., financed by my primary business) - I'm a sucker property, and I enjoy this, so whilst probably not the most efficient use of capital I get enjoyment out of it
- 15% stocks - only respectable funds, but 99% spread across equities, i.e SMT, Vanguard

The remainder is liquid cash (spread across savings account, Aldermore, Newcastle, Investec, Recognise Bank etc) which isn't where I want it. I was chasing additional BTLs for at least a year, bidding over asking price at times, but the market here in London has been irrational.

People here seem desperate to get Ltd. funds into their personal name, I'm not convinced about that long term, there are IHT benefits to accumulating wealth in a Ltd.

How did you the fund the separate ltd? did you draw an agreement and what loan rate did you go for? Accountant of my primary ltd co is not keen on 0%. His suggestion was to go for BOE base rate + 2% which I am not keen on as it would draw 20% income tax on it.

I do have savings account in Aldermore, redwood, investec and virgin but interest rates are not great.

My plan is open a business investment account with InvestEngine and invest purely in non-ftse ETF's regularly to absorb any downturn in the stock market and add a chunck if it drops. II charges £40 per month plus trading charges so not keen on that. Also looked at IB and HL.

Can I ask what platform do you use for stocks investment vis ltd company.

[TheGreenBastard]

I'd say I operate on the riskier side of things, my company capital is split roughly:

- Corporate crypto account, 5% (pure gamble but I wanted some exposure, my accountant doesn't like me, especially now with "staking" income)
- 25% BTL properties (in a separate Ltd., financed by my primary business) - I'm a sucker property, and I enjoy this, so whilst probably not the most efficient use of capital I get enjoyment out of it
- 15% stocks - only respectable funds, but 99% spread across equities, i.e SMT, Vanguard

The remainder is liquid cash (spread across savings account, Aldermore, Newcastle, Investec, Recognise Bank etc) which isn't where I want it. I was chasing additional BTLs for at least a year, bidding over asking price at times, but the market here in London has been irrational.

People here seem desperate to get Ltd. funds into their personal name, I'm not convinced about that long term, there are IHT benefits to accumulating wealth in a Ltd.

[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.

[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?

[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]

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 :-)

[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

[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.

[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

[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.