What to do with £200k in the bank?

[Where do we go from here?]

Hi guys,

New member and this is my first post here.

My question is: What would you do with £200k, after-tax, sitting in your business bank account?

I want to put the money to work, but see no room for improving my business with this amount of cash. Personally, we have no mortgage and need about £20k pa for living expenses. The goal is really to protect our money from inflation and hopefully make some more.

Over the next year, we expect cash in the bank to grow by another 200k to at least 400k. This is conservative because profit after tax was closer to £300k this year.

My thoughts have been to open a limited company for property investments, and loan the money to this new company.

My goal with this thread is really just to get some new ideas and have mine criticised. I'm in the North West of England and interested to meet anyone local in a similar position.

Thanks for reading and thanks in advance for any responses,

Lucas

 

[Financial-Modeller]

You have (ignoring inflation and tax) enough money for 10 years of living expenditure and expect to have 20 years-worth next year.

Spend it! Buy something nice!

Without an aspirational purchase in mind (bigger house, supercar, university costs etc) there is little point in accumulating further funds that you will never spend.

 

[Where do we go from here?]

You have (ignoring inflation and tax) enough money for 10 years of living expenditure and expect to have 20 years-worth next year.

Spend it! Buy something nice!

Without an aspirational purchase in mind (bigger house, supercar, university costs etc) there is little point in accumulating further funds that you will never spend.

There's nothing I want to buy!

My goal is to be able to cover our living expenses indefinitely (and then some) even if my business completely declines. I value security more than anything, so more money will always be better than less, or the same.

 

[Gordon - Commercial Finance]

I would buy an Audi RS6, and a couple of motorbikes.

Loaning it to another LTD co and then developing property is a good option, but also might be a good way to get stung if its something you don't know much about, or you don't have the right people around you to help.

£200k would definitely be a great start to get into developing property on a reasonable scale, and then you might be back in 18 months saying you've got £1m in your company bank account what should you do with it...

Then I would buy a Ferrari.

 

[Where do we go from here?]

I would buy an Audi RS6, and a couple of motorbikes.

Loaning it to another LTD co and then developing property is a good option, but also might be a good way to get stung if its something you don't know much about, or you don't have the right people around you to help.

£200k would definitely be a great start to get into developing property on a reasonable scale, and then you might be back in 18 months saying you've got £1m in your company bank account what should you do with it...

Then I would buy a Ferrari.

Turning £200k into £1m sounds good, but I know nothing about developing a property. It would be a whole new learning curve. Not to say it isn't an option, but it's not something I'd feel comfortable throwing a lot of money into now.

Seriously, I don't have expensive tastes The car and motorbike suggestions wouldn't do much for me.

 

[billybob99]

I'm pretty sure you're not gonna meet anyone in the same position.

 

[Where do we go from here?]

I'm pretty sure you're not gonna meet anyone in the same position.

I'm new here so I don't know if you're right. Any suggestions for a better place would be appreciated too.

I don't know anyone else in a similar position or who has been where I am now, hence my post here.

 

[Mr D]

Hi guys,

New member and this is my first post here.

My question is: -

What would you do with £200k, after-tax, sitting in your business bank account?

I want to put the money to work, but see no room for improving my business with this amount of cash. Personally, we have no mortgage and need about £20k pa for living expenses. The goal is really to protect our money from inflation and hopefully make some more.

Over the next year, we expect cash in the bank to grow by another 200k to at least 400k. This is conservative because profit after tax was closer to £300k this year.

My thoughts have been to open a limited company for property investments, and loan the money to this new company.

My goal with this thread is really just to get some new ideas and have mine criticized. I'm in the Northwest of England - interested to meet anyone local in a similar position.

Thanks for reading and thanks in advance for any responses,

Lucas

Perhaps start with what you like to do. What you know, what you are good at.
Financial advisers can help with investment if that's what you want to do.
Or you could look at how to turn what you like, what you know, into an income.

If not knowing much about property investments its probably the wrong thing at this point in time. However that's not to say you cannot spend a year or two learning if you wished then later investing.
Just because you have the money now does not require you to write a cheque this week.

 

[Gordon - Commercial Finance]

Seriously, I don't have expensive tastes The car and motorbike suggestions wouldn't do much for me.

I'll spend it for you!
Audi RS6 please, a Triumph Daytona, and a BMW S1000rr for starters.

Thanks

 

[Where do we go from here?]

Perhaps start with what you like to do. What you know, what you are good at.
Financial advisers can help with investment if that's what you want to do.
Or you could look at how to turn what you like, what you know, into an income.

If not knowing much about property investments its probably the wrong thing at this point in time. However that's not to say you cannot spend a year or two learning if you wished then later investing.
Just because you have the money now does not require you to write a cheque this week.

Thanks, Mr D.

The FA I spoke to on recommendation of my Accountant was advising me to max out my pension contributions. He's obviously motivated by the commission he'll get though.

I have other business ideas but they require little start-up capital. This is really a question of how to secure what I have.

 

[Gordon - Commercial Finance]

Thanks, Mr D.

The FA I spoke to on recommendation of my Accountant was advising me to max out my pension contributions. He's obviously motivated by the commission he'll get though.

I have other business ideas but they require little start-up capital. This is really a question of how to secure what I have.

If you have a mortgage, then one of the highest yielding investments you can make is to overpay the mortgage. If you do have a mortgage and the FA you spoke to didn't tell you this, then that FA is useless.

FAs make all their money on pension transfers etc, so they are supposed to be impartial but really they're not.

 

[Mr D]

Thanks, Mr D.

The FA I spoke to on recommendation of my Accountant was advising me to max out my pension contributions. He's obviously motivated by the commission he'll get though.

I have other business ideas but they require little start-up capital. This is really a question of how to secure what I have.

Find an FA and pay them for their time.
Just get recommendations. Explore them. Then go back to that FA or another FA with your own ideas about what you want to do.

FAs can be useful when all they are able to charge for is their time.

 

[SamPEL]

My thoughts have been to open a limited company for property investments, and loan the money to this new company.

I'd imagine there's a lot of different options with regards to tax planning when you structure that.

Anyway, I don't know anything about your business but most people I know who are actively managing businesses generating 200k+ a year don't have time to become successful property developers as well.

Secondly if you have 200k in your business bank account and you expect to generate another 200k next year that does rather imply that you've only just had your first year of generating a significant profit. If that's the case then I'd personally want a more significant warchest before risking 200k on an entirely new venture.

If your living expenses are 20k and you've no desire for material things then surely your focus should be on exit planning?

 

[Where do we go from here?]

I'd imagine there's a lot of different options with regards to tax planning when you structure that.

Anyway, I don't know anything about your business but most people I know who are actively managing businesses generating 200k+ a year don't have time to become successful property developers as well.

Secondly if you have 200k in your business bank account and you expect to generate another 200k next year that does rather imply that you've only just had your first year of generating a significant profit. If that's the case then I'd personally want a more significant warchest before risking 200k on an entirely new venture.

If your living expenses are 20k and you've no desire for material things then surely your focus should be on exit planning?

1. My initial idea wasn't to become a property developer but rather to buy-to-let and make some returns or at least protect the cash from inflation.

2. We've been in business for over 4 years. But we have cash savings in personal accounts and have bought and completely paid off a mortgage in this time. You're correct though - we're making more this year than any of the previous.

3. I wouldn't say I have no desire for material things. I have three children and a wife I need to make money for. No desire for toys for myself is probably more accurate.

 

[Opinion87]

How on earth are your living expenses only £20,000.00?!

 

[Where do we go from here?]

Find an FA and pay them for their time.
Just get recommendations. Explore them. Then go back to that FA or another FA with your own ideas about what you want to do.

FAs can be useful when all they are able to charge for is their time.

This is something that crossed my mind. I'll have to give it a go with someone new and see. Thanks for somewhat confirming my view of the FA. My instinct was to be a little suspicious.

 

[Where do we go from here?]

How on earth are your living expenses only £20,000.00?!

That's with a wife and 2 kids (+ one coming soon).

Why are yours more than £20,000?

 

[Opinion87]

That's with a wife and 2 kids (+ one coming soon).

How?! Not in knocking you, I'm just genuinely really interested.

Why are yours more than £20,000?

General debauchery, I guess. Looking after my mum and grandparents. Taxis. The apartment in Spain. It all adds up.

 

[Where do we go from here?]

How?! Not in knocking you, I'm just genuinely really interested.



General debauchery, I guess. Looking after my mum and grandparents. Taxis. The apartment in Spain. It all adds up.

I don't drive and I work from home. The wife's main luxuries are a new book every couple of weeks. Just frugal living, I guess.

 

[newguy007]

I am in the same position as you. My advice would be to put £40k per year into a pension if you don't really need the cash. This will reduce your corporation tax. You don't really need IFA for this if you know what you are doing. You need to do some research and buy funds/shares. Simply open a SIPP account transfer directly from the company. I wish I had done this from the start which could have saved me a lot.

If you are into property then you can do that by setting up a new company (SPV) and loaning the money from your main trading company. This is the best way to extract money from your trading company without paying taxes.

 

[Gordon - Commercial Finance]

If you do go down the route of pensions etc, then you can actually kill two birds with one stone here. Get a SIPP and put as much money as you can in it. You can then buy commercial property from the SIPP, and rent it out.

 

[billybob99]

How on earth are your living expenses only £20,000.00?!

Mine are £300 a month.

 

[Gordon - Commercial Finance]

I have a wife and two kids (wife doesn’t work) and my living expenses are about £30-£40k a year, but I have two cars, two motorbikes, an Amazon addition and I like expensive drink.

 

[Opinion87]

I like expensive drink.

Johnnie Walker Blue here so I somewhat feel your pain!

I have a wife and two kids (wife doesn’t work) and my living expenses are about £30-£40k a year, but I have two cars, two motorbikes, an Amazon addition

Does that include mortgage/rent?

Mine are £300 a month.

I'm assuming that's a joke.

Seriously though, £20,000.00 a year, I'd love to know how.

 

[AllUpHere]

We could live on 20 grand a year. Houses are mortgage free, all cars were bought with good old fashioned money. The only credit I have is mobile phone bills.

 

[Gordon - Commercial Finance]

Johnnie Walker Blue here so I somewhat feel your pain!

I went to my friend's place to play poker last Thursday - took a bottle of Bollinger with me....

Does that include mortgage/rent?

Yes it does.

 

[Opinion87]

I went to my friend's place to play poker last Thursday - took a bottle of Bollinger with me....

The £35.00 Bollinger or the £150.00+ Bollinger?

Yes it does.

Mind if ask what a rough breakdown would be? If your mortgage/rent was £1,250.00 - £1,500.00 a month... two kids, two cars and two motorbikes, expensive alcohol and the Amazon addiction...how do you make it all add up?

 

[Mr D]

I have a wife and two kids (wife doesn’t work) and my living expenses are about £30-£40k a year, but I have two cars, two motorbikes, an Amazon addition and I like expensive drink.

The drink gets drunk and you get drunker.

Have heard that kids add considerably to the shopping bill.

 

[Gordon - Commercial Finance]

The £35.00 Bollinger or the £150.00+ Bollinger?



Mind if ask what a rough breakdown would be? If your mortgage/rent was £1,250.00 - £1,500.00 a month... two kids, two cars and two motorbikes, expensive alcohol and the Amazon addiction...how do you make it all add up?

The Bolli was the "cheap" stuff. The wife would murder me if I got the other stuff!

My rent is only £750pm (I'm in Scotland), my two cars are on finance, but on mates rates and carefully structured so they're not expensive. My bikes are free of finance and one of them I rebuilt from scrap so didn't pay much money for it. Insurance on the bikes is cheap and I don't use them often enough, and I do all the servicing, maintenance and repair on all cars and bikes.

The alcohol and Amazon I am currently trying to cut back on. Phones are on sim only and also I have discounts so that's not much. The kids don't cost much as they're still young, although my eldest is now 5 and is getting involved in clubs and stuff which is starting to rack up.

Property being cheap in Scotland is the biggest factor though...

 

[Where do we go from here?]

I am in the same position as you. My advice would be to put £40k per year into a pension if you don't really need the cash. This will reduce your corporation tax. You don't really need IFA for this if you know what you are doing. You need to do some research and buy funds/shares. Simply open a SIPP account transfer directly from the company. I wish I had done this from the start which could have saved me a lot.

If you are into property then you can do that by setting up a new company (SPV) and loaning the money from your main trading company. This is the best way to extract money from your trading company without paying taxes.

What did you initially try which cost you more?

I feel torn between the options. My inner cynic yells me that all common investments like the stock market in general and real estate are over valued due to low interest rates. But the alternative to those is to watch inflation chip away at my money.

 

[Mr D]

I don't drive and I work from home. The wife's main luxuries are a new book every couple of weeks. Just frugal living, I guess.

I asked the wife - she thinks £20k a year is considerable. With 2 adults and 4 pets we don't hit that figure for spending and we eat well.

 

[newguy007]

What did you initially try which cost you more?

I feel torn between the options. My inner cynic yells me that all common investments like the stock market in general and real estate are over valued due to low interest rates. But the alternative to those is to watch inflation chip away at my money.

I spoke to multiple IFA and they all had the same answer PENSION

Initially, I thought I knew better so I spend over 3 months looking at various options and then decided it was the best option for the future I am not saying there are no other options but for pure saving, a pension is the best option.

I didn't think I needed to invest the money in the company too but you need to sit down and look at the big picture. I had around £1million in the bank and didn't have a clue. I used half the money to invest in the business and expand it. I could have got a commercial loan but what's the point when you have the money to invest right?

If you really don't want to invest money in your existing company, then find something else you can invest in. The only problem is that you cannot extract the cash without paying a higher tax. If you are into BTL then follow my previous advice which means you don't need to extract the cash. You can simply loan it to the new company.

 

[Martin Patfield]

Lend me £25,000 and I'll pay you back £500 a month (until it's paid off).

 

[samuel5]

If you are into property then you can do that by setting up a new company (SPV) and loaning the money from your main trading company. This is the best way to extract money from your trading company without paying taxes.

Do company loans not need to be paid back within a year though?

 

[newguy007]

Do company loans not need to be paid back within a year though?

No, you can do long term. It's not a directors' loan. You are basically creating a loan agreement between 2 companies. You will need to disclose it in your account filing since both companies are connected to the same owner.

 

[Where do we go from here?]

The £35.00 Bollinger or the £150.00+ Bollinger?



Mind if ask what a rough breakdown would be? If your mortgage/rent was £1,250.00 - £1,500.00 a month... two kids, two cars and two motorbikes, expensive alcohol and the Amazon addiction...how do you make it all add up?

You have to be living somewhere in the south. I wouldn't ever in my life have dreamed of spending so much money on rent or a mortgage. Our 4 bedroom, 3 reception room house with gardens front and back cost less than £200k.

 

[Where do we go from here?]

If you do go down the route of pensions etc, then you can actually kill two birds with one stone here. Get a SIPP and put as much money as you can in it. You can then buy commercial property from the SIPP, and rent it out.

Will look into t

I spoke to multiple IFA and they all had the same answer PENSION

Initially, I thought I knew better so I spend over 3 months looking at various options and then decided it was the best option for the future I am not saying there are no other options but for pure saving, a pension is the best option.

I didn't think I needed to invest the money in the company too but you need to sit down and look at the big picture. I had around £1million in the bank and didn't have a clue. I used half the money to invest in the business and expand it. I could have got a commercial loan but what's the point when you have the money to invest right?

If you really don't want to invest money in your existing company, then find something else you can invest in. The only problem is that you cannot extract the cash without paying a higher tax. If you are into BTL then follow my previous advice which means you don't need to extract the cash. You can simply loan it to the new company.

I suppose we could all just vote Labour. Solves the problem of how we're going to get rid of cash in the company.

(Obviously tongue in cheek)

 

[Mark T Jones]

I'm in a similar situation.

Mad spending and wild nights out are well behind me - though I still enjoy good food and decent wine (you can get that in Aldi now).

I have one specific car aspiration, which is now set as a performance goal for next year. Other than that I live very comfortably on £24,000 a year.

Also, no kids to pass it on to.

Which does, like the OP, raise the question of what to do with cash and - to an extent - how to stay motivated in business (currently it's because I genuinely enjoy it).

Hence I'm interested in all the comments on this thread.

 

[Ian J]

I have one specific car aspiration, which is now set as a performance goal for next year. Other than that I live very comfortably on £24,000 a year.

I suppose that I could too if it wasn't my weakness for overseas holidays as I have already booked four for next year with probably another one to go

 

[Mark T Jones]

I suppose that I could too if it wasn't my weakness for overseas holidays as I have already booked four for next year with probably another one to go

For various reasons, exotic foreign holidays aren't on the cards at the moment - we stick to 4 5-day breaks a year, which is remarkably cheap out of school holidays. (Also neither of us like the full-on posh hotel thing)