What to do?

[WindfallJoy]

Name changed for this.

DH has over the past two years started a business. He's worked in the area before and always talked about how one day he's going to break out on his own and get rich.

Well, he officially started in Jan and now has contracts worth nearly half a million, with the same again easily possible. I'm being deliberately vague about what he does but this is secure, and long term. Even allowing for the costs of carrying out the work and tax, he is still going to be bringing in a high 6 figure income in the next tax year, whilst doing something he enjoys.

For comparison, this year I earned £36k, and DH bought in £60k. We have a large mortgage and a home that has a kitchen/bathroom older than me.

We have primary aged children.

I'm trying to weigh up the risks of going part time, and also what we will do with the money. I'm relatively un-materialistic, clothes are bought second hand, holidays have been camping or visiting relatives, we both drive second hand cars. Other than buying a digital piano for DD, and getting our shower replaced, I'm at a loss.

I feel lucky, but also overwhelmed. And I also feel like I can't discuss this with family/friends.

Do I go part time? How do we invest this kind of money? How can I make sure our children get the most out of it?

If the money is guaranteed, you can quit your job and be put on payroll for his company.

It would be worth setting up ISAs for both of you (and each of your children) and paying in the maximum annual amount. Same again with pension pots. There are investment companies that can look after those for you.

Pay off your mortgage. If things are still good in a year’s time you can look to buy a bigger house (if that’s what you want).

Also don’t tell people details, just that the business is doing well.

Write a bucket list of all the things you would like to do.

And congratulations!

I suppose a lot of it depends on what you actually want your life to look like - do you want to work, are you building your own career, would you be happy being at home, or at home more?

The extra money I wouldn't give much of a thought to beyond your usual spending. Figure out what your family life looks like first, I reckon.

Give us a hint what the job is, I could do with that sort of income.

Working for his company would probably be good tax wise and saves explaining to anyone why you are working part time. You can say he needed help and you are now working for him. There may well be paper work that you could help out with and being involved would be good.

What to do with the money, pay off the mortgage, get the work you want done on the house then maximise pensions, ISAs, then best savings rates and S&S trackers (I would stick to simple trackers rather than fund managers who may or may not be any good). Are you thinking of private schools? Saving for university?

Get yourself a good financial advisor asap. They will advise on tax, pensions, investments etc and also long term & disaster (illness etc) planning. Make sure that whoever you see is registered (I think the FCA can help).

Then think of what you would like to do. And enjoy. B

Give it at least a year.

The failure rate for new businesses in the first 12-24 months is astronomical and I would caution you against putting all your eggs in one basket at this stage.

In time, it might be worth going into partnership with your DP or becoming a non-executive director, but at the moment, I'd say it's far too early in the journey.

I don't think this is the massive lifestyle change you are anticipating. Contracts worth half a million is not a half million in salary. My dh is the director of a limited company and I'd say that he certainly brings in that much in a year if not more. But that isn't his take-home pay. There are expenses to pay, investments to be made, future stock to be purchased, never mind tax to be paid at the end of every tax year in one big bill (has been as much as £100K in one go when we pulled loads out of the company in a given year).

We live a normal middle class life that is by no means luxurious. I earn about £40K working 4 days a week. Kids in state school. Secondhand cars. Normal UK holidays and camping and staying with family sort of holidays. Mortgage is £1600 a month. We do both have not inexpensive hobbies, but that's the main thing we spend personal money on. There isn't loads of money leftover each month, though we wouldn't struggle to replace a boiler or put in a new bathroom. We aren't holidaying in the Maldives by any stretch.

Don't spend it til you've banked it for a few years would be my advice, especially not until after the first tax bill. This will equate to a comfortable salary, but not wealth.

Thanks all, I think you are right and it's not going to be a huge change straight away.

We also have to make sure that DH has all the things that employment would normally provide - pension, death in service payments etc. A good conversation with a financial advisor makes sense.

DH has been contracting in this area before, so we are used to saving for tax and all of these implications, but taking a look at them makes sense.

I think I'd like to drop to 4 days a week, but I'd like to hit a few career goals first.

And I might just book a plumber to fix the shower.

We have a similar household income and invest huge amounts in pensions and ISAs.

You can get tax relief on 60k pension per person every year. At 45% tax that helps reduce your tax bill by 27k each year. I’d be looking at doing that first as you’ll not match that type of return over a year in any other type of investment. You can also take out 25% tax free once you’re 55.

It is also worth maxing out your premium bond allowance at 50k each as returns are tax free which again is a big perk when you’re a 45% tax payer with a nil allowance to earn tax free interest in non-ISA accounts.

I also agree I wouldn’t bother discussing it with anyone else unless you know they also earn similar amounts and can give some useful advice regarding the best approach to maximising the opportunity. Don’t bother mentioning it to family or neighbours not least because you don’t want them to change their view of you and also you won’t need to explain if circumstances change back to how they were previously.