If you operate a business in the UK, you might consider investing as a way to put your excess cash to work. Leaving a large balance in a business current account is unlikely to offer the best available returns, so it’s worth looking around to find the best place to hold your money while still meeting your business’s liquidity requirements. But as with any financial decision, investing as a limited company isn’t always the right option - this guide walks through some important considerations.
We’ve also got you covered if you’re thinking of opening a business account for investing. Read on as we introduce Lightyear for Business, which offers simple ways to buy and trade UK, EU and US assets, earn interest and invest in low-risk, high liquidity money market funds.
Disclaimer
This guide is intended for information only. Investment decisions are unique to your specific situation and business needs - get professional advice if you need it, to make sure your investments work optimally for you.
What are corporate investments?
Put simply, a corporate investment is when you use company profits for investment purposes, rather than leaving your balance in a business bank account or taking the funds as income. Using your business profits for investments can allow you to grow your assets, while leaving your money in a business account which has a poor interest rate will likely mean that your purchasing power diminishes over time. Corporate investments could be made by buying stocks and shares, investing in money market funds, buying tangible assets, using unit trusts, or paying into a company pension scheme for example.
There are lots of different options for investing as a limited company, which all have their own benefits and drawbacks. Getting help from a professional can be a smart plan if you’re unsure about the best way to balance your business needs and create a fitting investment strategy.
Why might I start investing as a limited company?
There are many different reasons why UK registered business owners choose to invest company profits rather than taking the money as income. Here are a few of the most common aims when business owners start to look into investing:
- Minimise the impact of inflation: leaving your business funds in a low-yield account can mean that your spending power is reduced thanks to inflation. A successful and diversified investment strategy can protect the value of your assets.
- Diversify company assets: investing in different asset types can be a good way to diversify and spread the risks associated with investments, as well as increasing potential exposure to assets which perform well.
- Seek out tax benefits: some corporate investment options may offer tax benefits - although you will still have to pay HMRC corporation tax on profits accrued through your investments. Seek professional tax advice to make sure you understand your duties in this respect.
- Earn passive income: investing in assets which pay interest or dividends can mean you receive ongoing income for your business, which can help cash flow.
- Build a healthy balance for the future: using your business profits for investment purposes could give you an opportunity to build reserves of funds for future business expansion or development.
Corporate investments: Pros and cons
As we’ve noted, investing on behalf of your business won’t necessarily be the right option for everyone. Here are a few of the pros and cons you may want to consider - and as always, getting professional support based on your specific business situation is a good idea.
| Investing as a limited company: pros | Investing as a limited company: cons |
|---|---|
| ✅ Some investments may provide better returns compared to standard business bank accounts | ❌ The value of investments may go down as well as up |
| ✅ Building a diverse investment portfolio spreads and mitigates investment risks | ❌ Investing ties up ready cash - not all asset types can be instantly accessed, which may prove difficult if you have unexpected expenses |
| ✅ Many different investment options available to suit different business needs and risk appetites | ❌ There's no annual tax-free allowance for companies, so for certain amounts it may make more sense to invest personally |
| ✅ Some investments may have tax advantages compared to drawing business profit as income | ❌ You may need to pay for additional financial and tax advice to ensure your investments are properly structured |
| ✅ Investments may provide ongoing income streams for your business |
How to buy stocks and shares as a business
If you’re thinking of investing as a limited company you’ve got a few options. There are many different types of investment vehicles which may suit you, depending on your own specific business needs. If you’re thinking of investing in stocks, shares and similar asset types, you could choose to use an on or offline broker, although digital options tend to be more convenient and may also offer fairly low overall costs.
There are many different providers out there, including services which offer specific business accounts which have their own features and perks to suit company owners. By registering an account with a digital first provider you’ll be able to manage your business investments from your phone or laptop, and access a broad range of account services and investment types all from the same provider. As with any personal investment, building a diverse and balanced portfolio is key when investing for your limited company - so choosing a platform which offers investments across different asset classes and countries can be a good plan.
It’s worth taking a careful look at the features and fees of any provider you’re considering for your corporate investments. The options available can vary a lot - as well as the fee structures. Picking a low cost, flexible service, which allows for multi-currency trading and investing, and which pays interest on uninvested cash can mean you find a good fit for your company needs now and in the future. We’ll introduce one option - Lightyear for Business - next.
Lightyear: digital share dealing accounts for businesses
Check out the Lightyear business account for easy ways to trade thousands of stocks and ETFs, as well as ways to invest in money market funds for flexibility and ease of access to your money.
Lightyear business accounts can be opened with no minimum deposit amount, making them accessible to many UK registered business owners looking to do something different with their excess business cash. Once you have your account you can trade and invest with just your phone or laptop, with interest paid on uninvested cash held in GBP, EUR and USD. There’s no charge to open your Lightyear account, no monthly fee, and no cost to transfer money in or out. Lightyear doesn’t charge execution fees for ETFs, and has low costs for currency conversion and share orders. For full details on fees, see our Pricing page.
Lightyear business cash interest
Keeping your business finances flexible is important - so it’s good to know that Lightyear pays interest on uninvested cash held in your account. Lightyear’s business cash interest is payable on select foreign currency balances - plus you can also choose to use Lightyear Vaults to invest in money market funds backed by BlackRock.
Lightyear Vaults can offer good returns on money which will be held in low risk, highly liquid investments. While the value of any investment can go down as well as up, Vaults offers instant withdrawals, and lets even smaller business owners access an asset type usually reserved for companies investing millions.
Conclusion: is investing as a limited company worthwhile?
Investing on behalf of your limited company can be a good way to avoid your profits being eroded by inflation, and may also help you diversify risk. For many business owners, building a balanced portfolio of different asset types, while making good use of high-yield, low risk investment vehicles, like money market funds, can be a good move.
As a business owner, you’ve got a lot on your plate - so picking a digital investment platform, such as Lightyear can make investing more convenient. You’ll be able to manage your money from your phone, with low fees, and access to multi-currency trading and investments to build a balanced investment strategy based on your specific business needs.
Disclaimer
This article is written for educational purposes only and should in no way be taken as investment advice. When investing, your capital is at risk. Seek guidance if necessary.
Charlotte is a Communications Manager at Lightyear. She's been sharing news and insights about the finance industry for over five years. At Lightyear she writes content about: product developments on the platform; data, research and news within the investing space; investing instruments and tools; and how individuals and businesses can grow their wealth.
