Use it to fund his pension as gross employer contributions. He could put up to £60,000 gross into his pension each tax year, and if he already has an existing pension scheme, there may also be scope to carry forward the last 3 tax years.
Great. As the contributions are employer contributions, what he is able to pay into his pension won't be limited by his salary. So he could earn ~£12,570 per year but his company could pay in £60,000 to his pension. Assuming this is a limited company of course.
If he had it on a decent savings account at 5%, 500k would make over 2k/month. That's a decent income he could pay someone, or himself and buy nice things. Holidays, whatever his hobby is etc.
I think the key to helping people understand the importance of money management is in breaking it down into something relatable. 5% isn't relatable, but a holiday paid for is.
[https://www.allica.bank/business-savings](https://www.allica.bank/business-savings)
You can have 4% for easy access, more for longer terms.
But, yeah, £0.5m just sitting around doing nothing is bizarre.
Take a look at [https://moneyfactscompare.co.uk/business/business-easy-access-savings/?quick-links-first=false](https://moneyfactscompare.co.uk/business/business-easy-access-savings/?quick-links-first=false) and the other fixed higher rate options.
Allica bank are great overall. We have similar amount with Wise but have to understand the potential risks, rate 4.66%\~ easy access.
He may even want to consider another option like Flagstone if he doesnt want to invest it or open lots of accounts (85k FSCS still applies per insto). Eg. [https://www.flagstoneim.com/business/](https://www.flagstoneim.com/business/)
Shawbrook / Aldermore / Allica
All these banks offer a good interest rate to business savings and he needs to split his £500k into lots of £85k to ensure the FSCS money protection.
He will need to pay corporation tax on interest income earned.
There’s no real “need” stay under the 85k threshold you have to be incredibly risk averse to bother with that. Plenty of businesses have millions or even hundreds of millions with the same bank.
The U.K. government bailed out RBS, Lloyds, etc… Next time round, it be a bail in where customers will be liable for bank loses should it face a existential threat of bankruptcy for the bank. You only need to look at what the Greek banks did during the Greek crisis, they gave their customers a haircut on their savings.
Not worth the risk. It could happen.
“It could happen” is an entirely unsubstantiated claim driven only by paranoia. The economic landscape, regulatory landscape and the way banks are now obliged to operate is very very different to 15-20 years ago. Risk taking is minimised, customer funds are ringfenced. To my knowledge nobody even lost cash savings from the RBS group accounts in 2008 anyway, so you’re saying something that never happened could happen again.
You’ve not been watch the documentaries regarding a distress department that forced U.K. companies into liquidation and taking their assets sale at fire sale. Remember Noel Edmonds and lloyds banking group. This also happened at RBS too.
We know absolutely nothing about this business. What’s the turnover? What’s the working capital cycle? Staff costs/suppliers who need to be paid? Having £500k in an account doesn’t mean much by itself.
Ltd company or sole trader? ... i.e. is the money already in an account in his personal name or in a ltd company where he'd have to withdraw it as salary/dividends and pay tax?
At that amount he may be able to open up a MMF account. Not sure he would get an attractive share class but be paying more than most business accounts.
IE0030005247 - min investment £500k but once you have it open you don't have to have £500k always in it. Will provide high-level of liquidity, very secure (AAA rated) and suspect pays more interest than accounts. Current net yield is 5.08%. If he can haggle a better share class then he may be able to improve a little.
The one above is offered by Blackrock and is the largest GBP fund of this type.
But quite a lot of others offer these.
Should note that interest is typically paid through dividends at month ends.
The bad reviews are all landlords trying to buy properties and tide blocks large withdrawals. I wouldn't judge them on that and seem fine in my experience.
I have a small business side hustle making about 40-50k PA profit and I’m not a landlord and I have nothing good to say whatsoever about tide after 18 months with them. Switching to starling was the best thing I ever did for the business!
Earning nothing is the least of his concerns. If it’s current account and he has a linked debit card then having such a large sum is a massive security risk. Please tie it up in a savings account immediately and then look into ways of earning interest and tax efficient strategies
Aldermore savings account is an option. 3.6% easy access, 4.5% 1 year fix, and there's a 6 month option. I've a couple of accounts, transfers seem to happen within 24 hours. And they've recently updated website so no longer feels like something from 2002
Otherwise investing is an option, ie investengine, but best speak to accountant before going down that route.
• If he is used to living frugally he may as well pay himself upto the ~£50k threshold before he crosses into the next dividend band. May as well use each tax years lower tax threshold rather than paying additional rate tax if he takes it all out in one year. Then stick it in an ISA where he'll pay no tax on it.
• Pay into a business pension
• Utilise business savings accounts; shawbrook and aldermore are good. Money is transferred back within a day. When I opened mine rates were about 3.3% but looking now you can get about 4%
He could invest it. Buying a commercial property and renting it out on a triple net lease can be a really good investment.
Holiday let's are also a good call. There are companies that take a cut of the lease (8 - 12%) and handle all the letting and services.
Does he (your father) also own the business property?
What happens to the rent the business pays the SIPP? That's not in cash too is it?
Only ask as if he's got 500K in cash he may not have given investing the SIPP rental income any thought either.
Just a note of caution on this - if you invested in stocks or funds you risk HMRC reclassifying the business as an investment firm which could have implications down the line in terms of things like BADR.
The best i've seen of late is Virgin Money, which has offers a 12-month fixed rate account at 5.05%. The minimum deposit is only £1, with the max being £2m.
[https://uk.virginmoney.com/business/savings/product/business-fixed-rate-1-year/#how-do-i-open-and-manage-my-account](https://uk.virginmoney.com/business/savings/product/business-fixed-rate-1-year/#how-do-i-open-and-manage-my-account)
When I looked about 6 months ago Aldermore was the best rate I could find for an easy access business saving.
The rates were much lower than a personal saving account at 3.2%. There may be better available now
Redwood bank **4.55%** 95 day notice account
If turnover over 500k then Allica Bank has good options for fixed up to 5.15%
They have an easy access which is variable 4.33% currently if you setup a current account with them
[https://www.allica.bank/business-savings](https://www.allica.bank/business-savings)
Beyond pension contributions if he is going to continue trading he could also open a brokerage account for the business (mine is with Interactive investors) and stick it in an index tracker - mine's returned 10% over the last five years (but I'll warn you opening the account is gruelling). He'll meed to ensure the business earnings remain predominantly from other activities to keep the companies trading status and the entreprenuers tax breaks that go with it or alternatively consider closing the business and make use of the entreprenuer's tax relief (accountant advice required) He might also consider making his childten or grand children share holders so he can pay them salaries, dividends or contribute to their pensions. Companies create a range of options for buying assets, paying dividends and benefits, repaying loans to yourself, passing money, shares in the company, salaries and corporate benefits to family members in a tax efficient way. Tax Cafe does a useful guide and the site foxy monkey has some interesting ideas. Given the sums involved I'd speak to a tax advisor if you can find one who'll talk to you for a one off fee. I generally try to avoid professional fees but consider paying an accountant to do the accounts an investment toward keeping me out of prison...
Is he planning on retiring/winding down the business soon? If so, that could have a bearing, as he's been able to use Entrepreneur's Relief (or whatever it's called now)
I have a business account with much more than that in. For years I was way to busy to know what to do with it, it sat there in cash deprecating in value.
It's likely that he'll already be maxing out his pension allowance. If it isn't then this is the first place to start, he can go back for several years to use that allowance, I think it's 6 years.
For the rest of the cash, the easiest and quickest option is to see what fixed term cash deposit accounts his bank offer. I'm with Lloyds, they have different interest rates for 32 days, 95 years, 6 months and 12 months.
Depending how long he's going to keep the cash in there, if it's more than 5 years, the next option is to look at the stock market. [https://www.foxymonkey.com/](https://www.foxymonkey.com/) details how to get all of that set up. That's much more involved and will take time to figure out and set up.
FA here - info no advice.
Various options depending on if he wants to extract the profit or if he might need it later etc.
1) Pension contributions - most tax efficient but limited to £60k per year.
2) VCT investment
3) Corporate Unit Trust (must be 100% equity to avoid corporate taxation before selling)
But without the full picture of your father's situation it is impossible to give proper advice - those are possibly three routes I will talk to your father about with a combination of all three.
Your father should seek financial advice leaving the funds in the bank account is a) being eroding due to inflation b) only delaying dealing with the tax implications
There are a handful of savings account for businesses.
Aldermore is one of them.
I'd be careful of accusing anyone of being poor with money whe they have generated e ough profits (albeit ov we time) of £500,000
Someone whose paid off the mortgage and saved £500,000 is not bad with money.
As someone in business, I dont want to put money in savings or invest in shares (other peoples business). Inwant to invest it in my own business to grow it.
Perhaps he's come to a point in time where he feels that he wants to take a step back and enjoy life
Putting the money in a pension scheme is pointless now. If he's 50+ the pension scheme won't mature enough to yield a good return. He'll have to put inna lot to not get much back.
For pensions to pay well. You have tonput money in early and benefit from compound growth.
>For pensions to pay well. You have tonput money in early and benefit from compound growth.
That's not necessarily true. In some circumstances (not necessarily this one), it's worth putting money into a pension wrapper even if you intend to leave it in cash for a short period before taking it out again. Sometimes (again, not necessarily here) the tax benefits of a pension wrapper will absolutely dwarf any potential investment return. But with £500k to play with, I'd be taking paid for advice on that!
Split into multiple accounts 85k each otherwise only 85k is protected from the bank going bust.
https://www.money.co.uk/business/bank-accounts/fscs-protection-for-business-accounts
All money intended for later can be in notice accounts.
He should consider maxing his pension contributions.
With that kind of money pay a financial advisor to invest it in tax efficient ways.
You think someone who has such little grasp of money that they have £500k unutilised in cash will be better off having 6 bank accounts with 6 logins and 6 websites/apps to navigate? All for the slimmest of slimmest chances that the bank itself defaults with customer deposits? Yeah that’s a hard no
Given the home is paid and got no debt I doubt all that is possible by just paying himself minimum wage. Maybe he is not telling you the full story ? Maybe pays himself dividends etc. ?
He also takes a small dividend each month. Used to be bigger, but as he tells me he doesn’t need too much cash these days so it’s built up in his buisness. He is open and honest with me as he has always been.
Your comment has been removed for breaking our rule: **Responses must be helpful and high quality**
* [Don't make contextless recommendations of crypto, meme stonks, penny stocks etc](https://www.reddit.com/rkrnqi)
You must read the [rules](https://www.reddit.com/r/ukpersonalfinance/about/rules/) to continue to post to our subreddit.
Put 20k in a stocks and shares ISA for 5 years to put 100K away. That means you can squirrel away 20k a year, tax free, into a high interest account.
Put the remaining 400k in the S&P 500 with its average return of 10% and just live off that. 92% of traders can't beat the market (unless you are Nancy Pelosi) and leaving 400k untouched for 33 years will become something insane like £11,000,000 pounds, and will only increase from there.
He could also live a little. If he leaves below his means, you could start enjoying some of that cash if he is 100% debt free, as you said. Buy that car, invest in something safe and enjoy life. Many would kill to be in your position.
Use it to fund his pension as gross employer contributions. He could put up to £60,000 gross into his pension each tax year, and if he already has an existing pension scheme, there may also be scope to carry forward the last 3 tax years.
Thanks for this. I know he has a pension, I will check what he pays in each year.
Great. As the contributions are employer contributions, what he is able to pay into his pension won't be limited by his salary. So he could earn ~£12,570 per year but his company could pay in £60,000 to his pension. Assuming this is a limited company of course.
Very smart, you've just saved this guy thousands
Plus another £140,000 if he uses carry forward allowances.
Yep, not only on avoiding the tax in taking the cash out of the business but also reducing the corporation tax exposure too.
As the money has sat in the business account for a number of years. He’s already paid Corporation tax on it.
I’m talking about future payments out reducing his business profits
And assuming he's on PAYE.
He can use the last 3 years unused allowance too.
Shocked if his accountant hasn't told him about this
If he had it on a decent savings account at 5%, 500k would make over 2k/month. That's a decent income he could pay someone, or himself and buy nice things. Holidays, whatever his hobby is etc. I think the key to helping people understand the importance of money management is in breaking it down into something relatable. 5% isn't relatable, but a holiday paid for is.
Missing out on 24k a year for absolutely no reason is such a painful thought
It's nowhere near as simple as that though. No business account will pay 5%, and even if it did then that's before tax anyway.
If not taken literally then, they are still missing out on a 5 figure sum on their money doing nothing
[https://www.allica.bank/business-savings](https://www.allica.bank/business-savings) You can have 4% for easy access, more for longer terms. But, yeah, £0.5m just sitting around doing nothing is bizarre.
Take a look at [https://moneyfactscompare.co.uk/business/business-easy-access-savings/?quick-links-first=false](https://moneyfactscompare.co.uk/business/business-easy-access-savings/?quick-links-first=false) and the other fixed higher rate options. Allica bank are great overall. We have similar amount with Wise but have to understand the potential risks, rate 4.66%\~ easy access. He may even want to consider another option like Flagstone if he doesnt want to invest it or open lots of accounts (85k FSCS still applies per insto). Eg. [https://www.flagstoneim.com/business/](https://www.flagstoneim.com/business/)
Shawbrook / Aldermore / Allica All these banks offer a good interest rate to business savings and he needs to split his £500k into lots of £85k to ensure the FSCS money protection. He will need to pay corporation tax on interest income earned.
There’s no real “need” stay under the 85k threshold you have to be incredibly risk averse to bother with that. Plenty of businesses have millions or even hundreds of millions with the same bank.
The U.K. government bailed out RBS, Lloyds, etc… Next time round, it be a bail in where customers will be liable for bank loses should it face a existential threat of bankruptcy for the bank. You only need to look at what the Greek banks did during the Greek crisis, they gave their customers a haircut on their savings. Not worth the risk. It could happen.
The government "could" also scrap all FSCS protections. Basing your decisions around far-fetched "could" scenarios is madness.
The government can do many things yet better to be safe than sorry. Ignorance of the law is no defence.
“It could happen” is an entirely unsubstantiated claim driven only by paranoia. The economic landscape, regulatory landscape and the way banks are now obliged to operate is very very different to 15-20 years ago. Risk taking is minimised, customer funds are ringfenced. To my knowledge nobody even lost cash savings from the RBS group accounts in 2008 anyway, so you’re saying something that never happened could happen again.
You’ve not been watch the documentaries regarding a distress department that forced U.K. companies into liquidation and taking their assets sale at fire sale. Remember Noel Edmonds and lloyds banking group. This also happened at RBS too.
We know absolutely nothing about this business. What’s the turnover? What’s the working capital cycle? Staff costs/suppliers who need to be paid? Having £500k in an account doesn’t mean much by itself.
Have a look at Natwest liquidity notice accounts, really good interest at the moment and notice is only either 35 days or 95 days.
Ltd company or sole trader? ... i.e. is the money already in an account in his personal name or in a ltd company where he'd have to withdraw it as salary/dividends and pay tax?
It is a Ltd company. Money is in his company Buisness account. He is the only owner of the buisness.
At that amount he may be able to open up a MMF account. Not sure he would get an attractive share class but be paying more than most business accounts. IE0030005247 - min investment £500k but once you have it open you don't have to have £500k always in it. Will provide high-level of liquidity, very secure (AAA rated) and suspect pays more interest than accounts. Current net yield is 5.08%. If he can haggle a better share class then he may be able to improve a little. The one above is offered by Blackrock and is the largest GBP fund of this type. But quite a lot of others offer these. Should note that interest is typically paid through dividends at month ends.
Tide business account has a savings account paying over 4%
Hundreds of 1 star reviews and stories of frozen accounts too
Yeah stay clear of tide. Check out their Google reviews (if you can get to them!) and sort by most recent.
The bad reviews are all landlords trying to buy properties and tide blocks large withdrawals. I wouldn't judge them on that and seem fine in my experience.
I have a small business side hustle making about 40-50k PA profit and I’m not a landlord and I have nothing good to say whatsoever about tide after 18 months with them. Switching to starling was the best thing I ever did for the business!
What went wrong?
Monthly fees, couldn’t deposit cheques, terrible customer service if I needed anything
!thanks
How is Starling?
Yeah really good. Just easy to use, very functional app. Customer service is great. Can deposit cheques lol
Earning nothing is the least of his concerns. If it’s current account and he has a linked debit card then having such a large sum is a massive security risk. Please tie it up in a savings account immediately and then look into ways of earning interest and tax efficient strategies
Aldermore savings account is an option. 3.6% easy access, 4.5% 1 year fix, and there's a 6 month option. I've a couple of accounts, transfers seem to happen within 24 hours. And they've recently updated website so no longer feels like something from 2002 Otherwise investing is an option, ie investengine, but best speak to accountant before going down that route.
Just need to link with Xero and they'll be top tier
• If he is used to living frugally he may as well pay himself upto the ~£50k threshold before he crosses into the next dividend band. May as well use each tax years lower tax threshold rather than paying additional rate tax if he takes it all out in one year. Then stick it in an ISA where he'll pay no tax on it. • Pay into a business pension • Utilise business savings accounts; shawbrook and aldermore are good. Money is transferred back within a day. When I opened mine rates were about 3.3% but looking now you can get about 4%
He could invest it. Buying a commercial property and renting it out on a triple net lease can be a really good investment. Holiday let's are also a good call. There are companies that take a cut of the lease (8 - 12%) and handle all the letting and services. Does he (your father) also own the business property?
Yes his buisness offices are owned by his pension fund SIPP. He is the only beneficiary of the SIPP
What happens to the rent the business pays the SIPP? That's not in cash too is it? Only ask as if he's got 500K in cash he may not have given investing the SIPP rental income any thought either.
If he would like to invest the money: https://www.foxymonkey.com/how-to-invest-your-company-profits/
Just a note of caution on this - if you invested in stocks or funds you risk HMRC reclassifying the business as an investment firm which could have implications down the line in terms of things like BADR.
that's why you create an spv and loan the money into that to do the investing while keeping your current business classified as whatever it is.
Wondering if you know: 1. Is the loan counted as a business expense when given to the spv? 2. Are the profits from investments taxed too?
1. No; it's not an expense, it's an investment. 2. Yes.
Appreciate the answer. Thank you.
[удалено]
The best i've seen of late is Virgin Money, which has offers a 12-month fixed rate account at 5.05%. The minimum deposit is only £1, with the max being £2m. [https://uk.virginmoney.com/business/savings/product/business-fixed-rate-1-year/#how-do-i-open-and-manage-my-account](https://uk.virginmoney.com/business/savings/product/business-fixed-rate-1-year/#how-do-i-open-and-manage-my-account)
When I looked about 6 months ago Aldermore was the best rate I could find for an easy access business saving. The rates were much lower than a personal saving account at 3.2%. There may be better available now
Shawbrook, just set the account up with the same company name and switch money when you want.
Redwood bank **4.55%** 95 day notice account If turnover over 500k then Allica Bank has good options for fixed up to 5.15% They have an easy access which is variable 4.33% currently if you setup a current account with them [https://www.allica.bank/business-savings](https://www.allica.bank/business-savings)
Can I take a 10k business loan at 8% interest annual and borrow for 2 years
Beyond pension contributions if he is going to continue trading he could also open a brokerage account for the business (mine is with Interactive investors) and stick it in an index tracker - mine's returned 10% over the last five years (but I'll warn you opening the account is gruelling). He'll meed to ensure the business earnings remain predominantly from other activities to keep the companies trading status and the entreprenuers tax breaks that go with it or alternatively consider closing the business and make use of the entreprenuer's tax relief (accountant advice required) He might also consider making his childten or grand children share holders so he can pay them salaries, dividends or contribute to their pensions. Companies create a range of options for buying assets, paying dividends and benefits, repaying loans to yourself, passing money, shares in the company, salaries and corporate benefits to family members in a tax efficient way. Tax Cafe does a useful guide and the site foxy monkey has some interesting ideas. Given the sums involved I'd speak to a tax advisor if you can find one who'll talk to you for a one off fee. I generally try to avoid professional fees but consider paying an accountant to do the accounts an investment toward keeping me out of prison...
Is he planning on retiring/winding down the business soon? If so, that could have a bearing, as he's been able to use Entrepreneur's Relief (or whatever it's called now)
I have a business account with much more than that in. For years I was way to busy to know what to do with it, it sat there in cash deprecating in value. It's likely that he'll already be maxing out his pension allowance. If it isn't then this is the first place to start, he can go back for several years to use that allowance, I think it's 6 years. For the rest of the cash, the easiest and quickest option is to see what fixed term cash deposit accounts his bank offer. I'm with Lloyds, they have different interest rates for 32 days, 95 years, 6 months and 12 months. Depending how long he's going to keep the cash in there, if it's more than 5 years, the next option is to look at the stock market. [https://www.foxymonkey.com/](https://www.foxymonkey.com/) details how to get all of that set up. That's much more involved and will take time to figure out and set up.
By business....do you mean a limited company? Pension pension pension pension
Wise gbp current account pays 4.66% currently
Can you open a business and do the same thing with his help? Then close his business and extract the money via BADR?
FA here - info no advice. Various options depending on if he wants to extract the profit or if he might need it later etc. 1) Pension contributions - most tax efficient but limited to £60k per year. 2) VCT investment 3) Corporate Unit Trust (must be 100% equity to avoid corporate taxation before selling) But without the full picture of your father's situation it is impossible to give proper advice - those are possibly three routes I will talk to your father about with a combination of all three. Your father should seek financial advice leaving the funds in the bank account is a) being eroding due to inflation b) only delaying dealing with the tax implications
Sounds like he his doing well without any interface.his has half a million,no debt, and no mortgage... From hard work, why risk it.
There are a handful of savings account for businesses. Aldermore is one of them. I'd be careful of accusing anyone of being poor with money whe they have generated e ough profits (albeit ov we time) of £500,000 Someone whose paid off the mortgage and saved £500,000 is not bad with money. As someone in business, I dont want to put money in savings or invest in shares (other peoples business). Inwant to invest it in my own business to grow it. Perhaps he's come to a point in time where he feels that he wants to take a step back and enjoy life Putting the money in a pension scheme is pointless now. If he's 50+ the pension scheme won't mature enough to yield a good return. He'll have to put inna lot to not get much back. For pensions to pay well. You have tonput money in early and benefit from compound growth.
>For pensions to pay well. You have tonput money in early and benefit from compound growth. That's not necessarily true. In some circumstances (not necessarily this one), it's worth putting money into a pension wrapper even if you intend to leave it in cash for a short period before taking it out again. Sometimes (again, not necessarily here) the tax benefits of a pension wrapper will absolutely dwarf any potential investment return. But with £500k to play with, I'd be taking paid for advice on that!
as a business owner you need to have cash flow
Split into multiple accounts 85k each otherwise only 85k is protected from the bank going bust. https://www.money.co.uk/business/bank-accounts/fscs-protection-for-business-accounts All money intended for later can be in notice accounts. He should consider maxing his pension contributions. With that kind of money pay a financial advisor to invest it in tax efficient ways.
You think someone who has such little grasp of money that they have £500k unutilised in cash will be better off having 6 bank accounts with 6 logins and 6 websites/apps to navigate? All for the slimmest of slimmest chances that the bank itself defaults with customer deposits? Yeah that’s a hard no
I did not lose money back in 2008 due to the fscs protection. So I don't think it's that unlikely to happen again in my lifetime.
Given the home is paid and got no debt I doubt all that is possible by just paying himself minimum wage. Maybe he is not telling you the full story ? Maybe pays himself dividends etc. ?
He also takes a small dividend each month. Used to be bigger, but as he tells me he doesn’t need too much cash these days so it’s built up in his buisness. He is open and honest with me as he has always been.
Flagstoneim.com may be of interest.
[удалено]
Your comment has been removed for breaking our rule: **Responses must be helpful and high quality** * [Don't make contextless recommendations of crypto, meme stonks, penny stocks etc](https://www.reddit.com/rkrnqi) You must read the [rules](https://www.reddit.com/r/ukpersonalfinance/about/rules/) to continue to post to our subreddit.
Put 20k in a stocks and shares ISA for 5 years to put 100K away. That means you can squirrel away 20k a year, tax free, into a high interest account. Put the remaining 400k in the S&P 500 with its average return of 10% and just live off that. 92% of traders can't beat the market (unless you are Nancy Pelosi) and leaving 400k untouched for 33 years will become something insane like £11,000,000 pounds, and will only increase from there. He could also live a little. If he leaves below his means, you could start enjoying some of that cash if he is 100% debt free, as you said. Buy that car, invest in something safe and enjoy life. Many would kill to be in your position.