£300,000 in one bank - what do I do?

bartsimpson

I've worked extremely hard over the past 10 years setting up my own business and earning enough money so that I'm now at a point where I have £300,000 saved, all with one bank.

This money is all in the business - I've not drawn it from the business because if I did it would be taxed at 40% interest, giving £120,000 of it to the current government is not something I intend to do.

My personal account contains a fraction of this amount.

I am now in the position where I am so scared I will lose all of my hard-earned money bar £35,000 of it. This is money I have worked so hard for to provide for my child's future.

Can somebody please give me some advice or just tell me what you would do in my situation? Should I start moving it now? Or just wait?

I should add that the bank is not Northern Rock or B&B, it is a major UK bank which has so far not really been mentioned in terms of crisis during the credit crunch.

Thanks.

isofa

It's incredibly unwise to keep all that in the business, I assume it's limited, otherwise you'd be paying tax anyway at that rate? If it is, if there is a problem with the business, and it folds, or is sued, any creditor will be able to access this money. I suggest you speak to a good accountant, vote the dividends and get hold of more of the money.

Stavros_3

I am in a similar position and have it all in one place and am quite relaxed about it. If this is causing you anxiety then the answer is to move it to either N/R, NS&I or one of the listed Irish banks to give you peace of mind.

Limes

Split it out to various institutions that operate under separate authorisations.

Do some homework, check the rates available and ensure that there are no links between the institutions and you should be fine. You can quite easily cover all of your money this way. Currently you should only need 9 different banks and when Gordon Brown does move the FSCS limit up to £50k then you'll only need 6.

If you do have problems finding enough different institutions, send me a private message, hand over a bunch of your money - 'cos I have nowhere near that limit anywhere at all - and when you need it back just let me know;) I'm sure we could come to some arrangement surely!!!

isofa

PS my post wasn't regarding it being unsafe to keep that in one bank, but it being unwise to keep it in your business if it's limited.

You cannot start splitting the money up, if it's in a limited business account and moving it to personal accounts, that would be fraud! It is the business' money, not yours, until you pay it as a salary or vote a dividend.

This all related to Limited companies, if you are a sole trader, then the money is already yours, and you'll have already been taxed on it, if you've been doing it correctly!

bartsimpson

isofa wrote: »

It's incredibly unwise to keep all that in the business, I assume it's limited, otherwise you'd be paying tax anyway at that rate? If it is, if there is a problem with the business, and it folds, or is sued, any creditor will be able to access this money. I suggest you speak to a good accountant, vote the dividends and get hold of more of the money.

Me and spouse already take full dividends, ie the maximum to still qualify for only 20-odd% tax.

I see your point, but the only problem could be if someone sues and wins more than £120,000 - because that's what i stand to lose in extra tax if I take it all out.

bartsimpson

isofa wrote: »

You cannot start splitting the money up, if it's in a limited business account and moving it to personal accounts, that would be fraud! It is the business' money, not yours, until you pay it as a salary or vote a dividend.

Can't the business spread the money around into different business accounts though?

isofa

bartsimpson wrote: »

Can't the business spread the money around into different business accounts though?

Possibly, but I'm not sure of the technicalities, we only have a business account and reserve account.

The OP is far more at risk by having all the money in the business, than he is having the money in one account over the FSCS 35K limit.

isofa

bartsimpson wrote: »

Me and spouse already take full dividends, ie the maximum to still qualify for only 20-odd% tax.

I see your point, but the only problem could be if someone sues and wins more than £120,000 - because that's what i stand to lose in extra tax if I take it all out.

Do you have an accountant? If you don't, with that sort of earnings you should have, they might cost, but easily pay for themselves when maximising tax allowances.

They can advise you on directors loans and all sorts, however it's likely at this stage you'll just have to pay the tax if you want to drawn down more, unless you have complex accounts, you've purchased another business, etc.

LucyTheDwarf

The business could have separate accounts, but this wouldn't protect the money from the business folding... What bank is it in? You say it's one that hasn't been mentioned... I'm taking a wild guess at HSBC, which is probably one of the safest banks that isn't owned by the government.

JimmyTheWig

If you ever plan to use this money then you'll have to pay the tax on it at some point, won't you?
I don't get the benefit of it sitting in a business account. Is it earning good interest?