From a non tax payer to ?

gadgetmind

Cheers, looks like we'll need to keep reclaiming PID tax via SA and PIDs in SIPPs by using "pester power".

I note that Bond income (including QCBs) is covered by the new rules, which means that I can ameliorate the changes to dividend taxation that would have affected self+spouse in early retirement once PCLS drops in.

bowlhead99

gadgetmind wrote: »

Cheers, looks like we'll need to keep reclaiming PID tax via SA and PIDs in SIPPs by using "pester power".

Or, depending on the particular fund that's giving you the PID, change platform to a SIPP provider that can handle receiving gross PIDs within your SIPP. Some handle it perfectly well.

Others (which might be favoured because they have overall lower fees) can't handle it properly on their antiquated systems so just have to ask the paying entity to send them money with tax deducted by default - and then presumably have to go through a tedious manual process for any customer who reminds them that they would have been eligible to receive gross.

At a quick look down Best Invest's fund list they seem to have a number of PAIF Feeders and not actual PAIFs, so I guess they just can't handle gross PIDs properly -but there are a number who do (e.g. Youinvest, HL etc). Though if you can live with the "pester technique" to get your money eventually, it may not be worth the hassle factor of having a "SIPP on the side" with another provider and an extra fee structure and impracticality for annual rebalancing.

gadgetmind

bowlhead99 wrote: »

Or, depending on the particular fund that's giving you the PID

Fund? I don't use UTs or OEICs because of high fees, and eschew open ended vehicles for anything illiquid as a matter of course,

Our property holdings are REITs and (not yet REIT) property companies. Add to this a little IUKP and some infrastructure (INFT, INPP, HICL, JLIF, BBGI) and that's that.

change platform to a SIPP provider that can handle receiving gross PIDs within your SIPP. Some handle it perfectly well.

BestInvest are OK generally, and my fees are very low, but they clearly have this one area of weakness.

At a quick look down Best Invest's fund list they seem to have a number of PAIF Feeders and not actual PAIFs

I don't use funds (hate high fees, open ended sucks, etc.) and don't know what a PAIF is TBH! I keep it simple, keep it nimble, and avoid fees at every turn.

bowlhead99

gadgetmind wrote: »

Fund? I don't use UTs or OEICs because of high fees, and eschew open ended vehicles for anything illiquid as a matter of course,

Our property holdings are REITs and (not yet REIT) property companies. Add to this a little IUKP and some infrastructure (INFT, INPP, HICL, JLIF, BBGI) and that's that.

Yes, I was just using 'fund' in the colloquial sense really: whether you have a closed ended investment fund or an open ended investment fund, it's a collective investment scheme for a bunch of people to come together and invest in a portfolio of 'stuff'. Closed ended makes sense for getting liquid access to illiquid assets, as you say.

REITs are perfectly capable of paying PID gross. British Land's investor page (http://www.britishland.com/investors/dividends/reits-dividends-and-uk-tax.aspx) has a bit about it and mentions the type of tax exempt people who can get paid gross. A UK pension scheme is obviously one of them as it's tax exempt and therefore it (or its intermediary platform entity) can just fill in a form and British Land will happily send their PID gross.

So, no reason why a platform could not structure itself to have the nominee / trustee entity which holds shares on behalf of its customers' SIPPs or ISAs just fill out the form to always get paid gross and then - having received the PID gross from the investee REIT or fund - allocate it through as a gross amount to the customers' SIPP accounts and keep the proper records about it.

Of course, if they have legacy systems which don't track PID as an income stream, or they've got a single nominee co acting as nominee for a mix of wrapped and unwrapped customer types to help buy or hold investments in bulk, it's trickier for them to handle and they just resort to accepting net distributions. So they then have some rigmarole/palaver every time you tell them you want them to go and chase a gross-up of what they received net of withholding tax and allocated to you.

BestInvest are OK generally, and my fees are very low, but they clearly have this one area of weakness.

Yes if you can still get the gross money to which you're entitled, albeit after a delay and a faff, there's no need to jump ship and pay £100 a person for SIPP custody elsewhere just to smooth that bit of the service if you can stay where you are and presumably pay less. ISTR Bestinvest are good if you have multiple people with multiple account types which didn't apply to me last time I was looking to move. As a thought though, Youinvest have a deal at the moment where they reimburse your transfer out costs from your old provider up to £500.

I don't use funds (hate high fees, open ended sucks, etc.) and don't know what a PAIF is TBH!

Basically a Property Authorised Investment Fund is an open ended one but with some tax efficiencies. A traditional unit trust or OEIC pays tax on its property income. Whereas a PAIF just streams its income into interest, PIDs and divs and pays it all out to investors based on the regulations and like a REIT, doesn't pay tax on the income itself.

If you are a non tax payer that's quite handy - because you get gross access to the income stream without needing a reclaim, so people with ISAs or SIPPs who don't mind using open ended vehicles for property investment would quite like PAIFs. However, some platforms can't handle gross PID income (which as mentioned elsewhere is essentially property lettings income as opposed to basic interest or dividends) and so people who want to access the PAIF on those plaforms would typically invest through a Unit Trust 'feeder fund' which gets the gross income, pays tax on it, and distributes the taxed income to the investors .

But basically I just mentioned PAIFs because the fact that Bestinvest don't list them on their funds list that I could see (instead, just listing a bunch of popular feeders to popular PAIFs and not the PAIFs themselves) implied that they couldn't handle gross PID for one reason or another and therefore were not the optimum platform for someone who's a non tax payer due to ISA or SIPP status and wants to invest in property.

badmemory

If your wife has an unclaimed state pension then it would be worth an awful lot more than any tax that won't need to be paid on interest. If she is the same age as you her SP is now worth 60% x £119 per week plus 10.4% for 11 years. Or Approx £150 per week. AND she could still pass some of her unused tax allowance to you if needed. If she is eligible to claim you should make sure that she does. That would make a significant improvement to you joint finances.

badmemory

John_Ray wrote: »

If you don't pay in you don't get anything out.

This isn't entirely true if you were married and your state pension was due before 6/4/16.

Terry98

sleepymans wrote: »

For more info see this HMRC booklet:

Personal Savings Allowance/ latest information - GOV.UK

On page 1 Para 3 says this:
If your taxable income is less than £17,000
If your total taxable income is less than £17,000 you won’t pay tax on any savings income.

That sounds extremely simple to me, and surely answers the original poster's query?? Or am I missing something?

I assume this is the publication you are referring to https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance

I don't think it is simple at all. So my taxable income is £16k and I have £10k in savings income I don't have to pay any tax.

The £17k includes the £5k that only applies to low earners and not everybody!

Martin's R5L podcast on Monday http://www.bbc.co.uk/programmes/p02pc9xt/episodes/downloads
glossed over the £5k. In fact he asked a caller to google it!

Sorry Martin I can usually understand what you say but this has got me thinking!

bowlhead99

Terry98 wrote: »

I assume this is the publication you are referring to https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance


I don't think it is simple at all. So my taxable income is £16k and I have £10k in savings income I don't have to pay any tax.

Correct.

The quote at the leaflet in point 3 is:
"If your total taxable income is less than £17,000 you won’t pay tax on any savings income."

So, if you look at all your taxable income from all sources including savings income, employment income, pension income, business income etc - and it is less than £17k, then you will not be paying any tax on your savings income.

In your example, if your total taxable income is £16k, and this total taxable income includes £10k of savings income (so, we get the impression that your non-savings income is only £6k, right?) then you don't have any tax to pay. Because in that situation, all your £6k of non-savings income is easily covered by your annual personal allowance of £11k, and all the £10k of savings income is partly covered by the remaining £5k of your annual personal allowance, and partly covered by the £5k band in which savings income is only taxed at 0%.

However, if you mean that your income from your job or pension or business is £16k and *then on top* you have £10k of savings income then yes, you will be paying tax on most of your savings income. Because your money from your job or pension is using up all of the £11k annual personal allowance and all of the next £5k band which could have been taxed at a low rate on savings income if it wasn't used up by your employment or pension.. So the only relief you'd have available for your savings income is the new £1k Annual Savings allowance, and the remaining £9k of savings income would be fully taxable.

But in that situation you wouldn't be able to say that your "total taxable income is less than £17k", because clearly your total taxable income is £26k. Your savings income won't be able to make use of the £5k band which exists for low earners because you are not a low earner and the £5k band is already filed with other stuff.

The £17k includes the £5k that only applies to low earners and not everybody!

It certainly applies to everybody who has total taxable income of less than £17k, and by taxable income we mean the things that people pay tax on, like income from a job or pension or business or savings interest etc.

Martin's R5L podcast on Monday http://www.bbc.co.uk/programmes/p02pc9xt/episodes/downloads
glossed over the £5k. In fact he asked a caller to google it!

I'm not going to download and sit and listen to a podcast to check what he said but if you google it you would find the factsheets that explain how it works and maybe even this thread and lots of other threads on the MSE forums which explain how it works.

Makes sense that he would refer you to using a search engine to find the official or reliable sources rather than try to answer a question from a caller in great detail live off the top of his head.

Sorry Martin I can usually understand what you say but this has got me thinking!

Keep thinking and it will probably become clear.

gadgetmind

bowlhead99 wrote: »

ISTR Bestinvest are good if you have multiple people with multiple account types which didn't apply to me last time I was looking to move.

Yes, and myself+spouse have both ISAs and SIPPs with them. They are also honouring their old "custody fee" for shares (inc REITs and ETFs) so our fees including everything (OK, dealing for new money and rebalancing is an estimate) is around 0.4%.

Basically a Property Authorised Investment Fund is an open ended one but with some tax efficiencies. A traditional unit trust or OEIC pays tax on its property income. Whereas a PAIF just streams its income into interest, PIDs and divs and pays it all out to investors based on the regulations and like a REIT, doesn't pay tax on the income itself.

Handy to know, but holding property via an open ended fund has bitten many people (including myself) very badly in the past and it's not a mistake that I'll be repeating.

xylophone

I hold REITS in my II ISA - the tax on PID is reclaimed and appears in the account around six weeks after the PID has been received.