Cash surplus & what to do with it

[Paulzx]

Hello All,

I have a sizeable cash surplus in my business bank which is just sitting there doing nothing. Obviously we've had low interest rates
and when you look at some of the bank's savings accounts, it's laughable what they're offering.

Has anyone found a decent savings account or a creative way to use surplus cash to earn something back?

Cheers
Paul

 

[Mark T Jones]

There are numerous threads on here around this topic

Ultimately it boils down to your knowledge/interests and your appetite for risk.

Personally I've dumped a load of cash in premium bonds - returns just over 1% so far - plus the near certainty of that £1 million win in the near future..

 

[MyAccountantOnline]

Hello All,

I have a sizeable cash surplus in my business bank which is just sitting there doing nothing. Obviously we've had low interest rates
and when you look at some of the bank's savings accounts, it's laughable what they're offering.

Has anyone found a decent savings account or a creative way to use surplus cash to earn something back?

Cheers
Paul

Is this for a limited company or are you a sole trader?

 

[Gettingthereslowly]

I don't want to start an argument with you Mark, but you are wrong.

That million is due to come MY way in the near future.

 

[Paulzx]

Is this for a limited company or are you a sole trader?

Yes it's money in the limited company bank account, which obviously puts limits on taking it out to do something unless it's business related?

 

[Paulzx]

There are numerous threads on here around this topic

Ultimately it boils down to your knowledge/interests and your appetite for risk.

Personally I've dumped a load of cash in premium bonds - returns just over 1% so far - plus the near certainty of that £1 million win in the near future..

I have thought about that, plus the usual stock market stuff but that's very volatile at the moment - but to get the money out to do any of that would be difficult, which is why I was thinking of at least putting it in a savings account, but they're useless

 

[ChrisCallaghan]

I'm a bit old school on this one. I'd take out what you can in legal dividends and/or a pension scheme.

Depending on how sizeable the surplus is, never hurts to sit down with a Financial Advisor. Or, even better, a meeting with a good FA and your accountant to cover any tax implications.

 

[Paulzx]

I'm a bit old school on this one. I'd take out what you can in legal dividends and/or a pension scheme.

Depending on how sizeable the surplus is, never hurts to sit down with a Financial Advisor. Or, even better, a meeting with a good FA and your accountant to cover any tax implications.

Thanks for the suggestion Chris. Pension isn't a bad idea, it would have to come out as drawings though and therefore get taxed I assume. I was wondering if anyone had found a decent savings account offering anything higher than the usual non existent interest but it doesn't sound like it!

 

[MyAccountantOnline]

Thanks for the suggestion Chris. Pension isn't a bad idea, it would have to come out as drawings though and therefore get taxed I assume. I was wondering if anyone had found a decent savings account offering anything higher than the usual non existent interest but it doesn't sound like it!

You could pay company pension contributions.

 

[MyAccountantOnline]

It's not a super rate of interest but HMRC do pay interest on tax paid early

Get a refund or interest on your Corporation Tax

Get a refund or interest if your company pays too much Corporation Tax or pays it early

www.gov.uk

 

[Paulzx]

You could pay company pension contributions.

Hi Nicola,
You mean into my own workplace pension? I was wondering about that although I actually opted out because I had another private pension. I should probably go back in to the workplace one then.

 

[Paulzx]

It's not a super rate of interest but HMRC do pay interest on tax paid early

Get a refund or interest on your Corporation Tax

Get a refund or interest if your company pays too much Corporation Tax or pays it early

www.gov.uk

Hmm that's interesting, 0.5% is still better than the average savings accounts. So basically you pay your corporation tax before the deadline and they give you interest on it?

 

[MyAccountantOnline]

Hi Nicola,
You mean into my own workplace pension? I was wondering about that although I actually opted out because I had another private pension. I should probably go back in to the workplace one then.

A Workplace pension is one option. A company pension is another.

 

[MyAccountantOnline]

Hmm that's interesting, 0.5% is still better than the average savings accounts. So basically you pay your corporation tax before the deadline and they give you interest on it?

Yes but as it states in the link just bear in mind (copied and pasted from the link)

Early payments​

HMRC will usually pay interest from the date you pay your Corporation Tax to the payment deadline.

The earliest date they’ll pay interest from is 6 months and 13 days after the start of your accounting period.

 

[xjr13m]

I just had a letter from Barclays, 'pleased to offer me' their Business Premium savings account. Deposit upto £1 million and get 0.15% interest. Just a joke. So I had a quick look and found Recognise Bank, they have an easy access business savings account offering 1.5% on deposits over £1,000. Max deposit £85,000 to ensure full FSCS cover. Better than your surplus cash just sitting doing nothing in a current account.

 

[Paulzx]

I just had a letter from Barclays, 'pleased to offer me' their Business Premium savings account. Deposit upto £1 million and get 0.15% interest. Just a joke. So I had a quick look and found Recognise Bank, they have an easy access business savings account offering 1.5% on deposits over £1,000. Max deposit £85,000 to ensure full FSCS cover. Better than your surplus cash just sitting doing nothing in a current account.

Excellent find! Shocking really that I'm getting excited at 1.5% but these are the times we live in.
Next question is how would you go about transferring surplus money from a Lloyds business account to Recognise Bank etc if anyone has done such a thing before?

 

[UK Contractor Accountant]

Hi Nicola,
You mean into my own workplace pension? I was wondering about that although I actually opted out because I had another private pension. I should probably go back in to the workplace one then.

No - into your Self Invested Personal Pension (SIPP)

Company gets corporation tax relief @ 19% on the contributions and the income/gains within the Pension wrapper are tax free.

As always speak to an IFA to get proper advice before action.

 

[UK Contractor Accountant]

Have seen Directors try to get their SIPP's to invest in Classic Cars before!!

All depends on what investments your SIPP provider will allow:

pubs
hotels
gold
zoos
airports
recording studios
fine wine
antiques
art
etc

HMRC do tax some of those on you personally if you have private use of them whilst in a SIPP.

 

[Bobbo]

Excellent find! Shocking really that I'm getting excited at 1.5% but these are the times we live in.
Next question is how would you go about transferring surplus money from a Lloyds business account to Recognise Bank etc if anyone has done such a thing before?

The same way you transfer money to anyone? Cheque/ cash/ BACS etc

 

[SoFar]

I'm looking at fixed interest savings accounts, e.g. Virgin Money 2.4% for a year, Nationwide 3% for 18 months.

Does anyone know how quickly these rates respond to BOE increases? I'm just wondering if I apply today, if they may increase slightly in a fortnight for example.

 

[DontAsk]

Does anyone know how quickly these rates respond to BOE increases? I'm just wondering if I apply today, if they may increase slightly in a fortnight for example.

Some quite quickly, some not so. Marcus (not fixed rate) put their rates up before the BoE announcement.

 

[HFE Signs]

Hi Paul, Did you decide what to do in the end? I was in a similar position and I decided on Premium Bonds

 

[Truemanbrown]

How about putting money into a SIPP and using that to purchase a commercial property.

 

[Newchodge]

How about giving it to the Treasury? They seem to need it!

 

[macScot]

I guess it will depend on how much money you have for investment and if it may be required for withdrawal soon. Investing in property could possible give the best returns, however, UK REITS can work well too if you do not want the hassle of managing the entire property process (buying, repairing, renting, selling).

Pensions (for individuals) are great options where there is no need to get the money back soon, however, as a company, you could invest in shares instead (research for recommendations maybe those that pay dividends) or invest in funds such as FTSE, etc. There should not be any corporation tax on the dividends earned from UK companies (double check for investing in shares outside of the UK), and the advantage is that this could be liquidated in the near future, unlike pensions where you have to reach retirement age. Also, the risk with company pensions is you cannot pick and choose individual company shares so have to pick from managed funds, etc., so you are less in control of where all the money goes.

 

[MBE2017]

REITS or SSAS would be my suggestion, depending on the amount. As with any type of investment, there are so many factors you need to sit down with a specialist and discuss what you want to be able to do and achieve.

Everything, even down to your age and what level of risk you are happy with can come into play.