What to do with the proceeds from a house sale?

WillCalderwood

I'm got the sale of a Buy to Let property completing on the 9th July - I was having problems with the agents and was too far away to manage it myself.

I'll be getting about £200k from the sale but I have no idea what to do with it. I could put it into a property closer to home (I'm in Oxfordshire), or I could invest elsewhere or pay off my mortgage.

Any suggestions as to what to do with the money would be appreciated.

Cheers,
Will

bigfreddiel

Pay off mortgage, start an equity isa, put the rest into ns&i premium bonds, an investment bonds until you decide on something else.

Banks will only guarantee £85k and from January next year that will only be £75k

Cheers fj

kidmugsy

How old are you? How well pensioned are you? Will you be paying higher rate income tax after you stop receiving the rent?

jamesd

Paying off the mortgage is a low return investment choice, since all it does is save you the mortgage interest rate. BTL closer to home can have the advantage of leverage to both potentially increase returns and help with diversification if you use the money to buy more than one property.

Have you considered P2P? There are some interesting options paying 10-12% or sometimes more, without excessive levels of risk - usually secured on physical property of some sort, be it pawned items, manufacturing plant, planes, houses or whatever else. There are also lower interest rate options that pay only 5-6% and those are the better known ones.

Are you using VCTs yet? 20% initial tax relief, capped at the income tax actually paid in the year of purchase, and tax free (for all income tax rates) dividends of 8-11% or so after allowing for the effect of the initial 30% price reduction. It's an interesting way to both reduce income tax bills and get some tax free income. Risk levels vary widely, from secured on buildings, renewable energy and other physical plant to highly speculative new technology.

WillCalderwood

I'm in my mid 30s, so a long way from retirement. I have pretty much zero pension, but have another BTL property in South London that does very nicely (I see that as my pension). I'm thinking about diversifying away from property so I don't have all my eggs in one basket and IMO property speculation doesn't look as promising as it did 10-15 years ago. That said, at least I'm familiar with property.

I see paying off my personal mortgage as a last resort if I can't decide what else to do. I'm only paying ~3% on it, so I can get better returns elsewhere. Also, due to my erratic income banks don't like me much these days. I've recently started a mobile games company too and pay myself nothing, so cash might be useful as borrowing isn't easy.

I've got a small chunk of cash in P2P. Bondora for high risk, unfortunately in Euros, and Zopa. I'm thinking about putting some more into other P2P. Any recommendations?

My income will probably hit the higher rate tax bracket this year. I'm generally around the threshold.

I know nothing about VCTs. I'll have a good read in the morning. Thanks for the tips so far.

mvarrier

I'm thinking about putting some more into other P2P. Any recommendations?

Have a good read around here:
http://p2pindependentforum.com

Personally I like savingstream (although you may want to diversify away from property if you already have a BTL

CKhalvashi

jamesd wrote: »

Are you using VCTs yet? 20% initial tax relief, capped at the income tax actually paid in the year of purchase, and tax free (for all income tax rates) dividends of 8-11% or so after allowing for the effect of the initial 30% price reduction. It's an interesting way to both reduce income tax bills and get some tax free income. Risk levels vary widely, from secured on buildings, renewable energy and other physical plant to highly speculative new technology.

I prefer the thought of SEIS, especially with the scheme as it is (higher risk but 75%ish guarantee, which if split between companies should give a dcent tax free return)

VCT's are another way, as is EIS, which is lower risk, but generally lower reward.

jamesd

Can you say more about SEIS with examples? Maybe in a new topic? Sadly I'm almost completely unfamiliar with this particular tax wrapper and that greatly limits how much I can sensibly write about it here.

kidmugsy

WillCalderwood wrote: »

I'm in my mid 30s, so a long way from retirement. I have pretty much zero pension ... due to my erratic income banks don't like me much these days. I've recently started a mobile games company too and pay myself nothing, so cash might be useful as borrowing isn't easy.

My income will probably hit the higher rate tax bracket this year. I'm generally around the threshold.

If you might want some of the capital for your business then there's no point alienating that money by sticking it in a pension or repaying your mortgage. Unless: is your mortgage the flexible sort whereby you can re-borrrow overpayments? If not could you transfer to such mortgage, or switch to an offset mortgage?

I don't know anything about pensions for someone who owns a company: I wouldn't be surprised if there were some way of contributing tax-efficiently. But your BTL income doesn't count for justifying pension contributions.

chiny

Interesting problem for the OP. With his having just started a business, time may well be short but perhaps a read of some of the specialist personal finance blogs with an eye on that non-existent pension. YMMV but I would start with Monevator or perhaps FIRE v London is closer to the OP.

I'm with bigfreddiel and have just max'd out Premium Bonds and Santander 123 whilst I ponder what to do with a lump sum.