I have noticed that this is often an overlooked area and it really shouldn’t be. I have come across business owners that have let hundreds of thousands sit in their current account for years, and there are many investment funds that have produced a return of 100%+ over the last 5 years. Do the math.
This is another important element to wealth management but also in a way, an insurance policy.
As one of my corporate clients said “Whatever happens with my business, I want to be able to pay myself the same salary from my investment…. The sale of my business will be a bonus”.
A corporate investment portfolio takes the form of an investment account in the name of your limited company. The same funds are available to invest in within a corporate investment as your personal investments in an ISA, Pension or personal Investment account.
You would not be drawing a salary prior to investing. The money moves from the business current account into a business investment account. It is a liquid investment. If withdrawals need to be made you would normally receive the money in your current account with 7-10 working days.
Provided that there is more than 40% invested in equities, and there should be for growth potential, you will not pay tax whilst the investment is growing. You would only pay tax as and when you withdraw, and as my accountant says, “you would be paying tax on free money you never had”.
When your business journey is over, it is possible to get the money out of the corporate investment account and into your personal investments. I do not advise on this space, but between my trusted corporate finance advisers and solicitors, this can be achieved.
Pension Contributions From Your Limited Company
When your Limited Company pays into your pension, it saves your company corporation tax, plus the money invested will be working for you. You are paying yourself rather than spending money to save tax, whilst building your assets and a future income.
A combination of a corporate investments via an investment account providing capital growth whilst maintaining liquidity, and a pension to mitigate corporation tax would be an effective way to secure a future income separate to your business and maximise on your success.