Investing for the Future

November 27, 2019

As I watch my one year old playing with the box her new toy came in; so carefree, her whole life ahead of her.

I think… ‘what on Earth have you managed to get all over your face now?!’.

Three baby wipes and several tears later, that thought is followed by ‘what am I actually doing to provide for your future?’.

The business is going well and we have some savings, but I’m not sure that 57pence I made in interest last year is going to fund you through university, or pay for your first deposit on a house, or allow you and your boyfriend to make countless trips to Amsterdam because you’ve suddenly discovered an interest in Dutch architecture – I’m not falling for that one baby!

So, let’s consider the options:

Stocks and Shares

Investing cash surplus in the stock market is the high risk, full throttle option but can yield some good returns.
You have the option here of investing directly through your company or drawing a loan from your company to invest personally. This would allow you to take advantage of the Capital Gains allowance. This is afforded to individuals but not businesses – but make sure you are aware of any interest/tax implications with your loan.
Take care also when trading through your business that you do not run the risk of being considered an ‘investment company’ as opposed to a ‘trading company’. This could pose a threat to your claim for Entrepreneur’s Relief in the future.

Property

Whether through your current Ltd company or financed by the same through a separate entity, rental property investment has become increasingly popular in recent years and rightly so. This route allows you to inject your cash into an asset that will hopefully increase in value over time whilst making you a return on monthly rentals. That income can then be extracted tax efficiently or reinvested in additional properties.
By doing this through your company, you can also benefit by expensing the full amount of your finance costs incurred i.e. mortgage interest which is no longer available to landlords on an individual basis.
Be aware that it can be harder for companies to obtain a mortgage initially so this may only be viable if you have been trading for a certain period of time.

High Interest Accounts

A lower yield than the above options however there is no work involved with this one and far lower risk involved.
Typically with higher interest accounts or bonds, you will agree to tie your money up for a minimum period ranging from a few months to a few years with the reward providing you with a higher interest rate than regular current accounts.
Note there may be penalties if you decide to withdraw your cash sooner than the agreed timeframe.

What do you think then baby? Oh! Now you sleep – why does this always happen when I talk accountancy with you??

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