What would I do with it?

MEM62

When my OH and I bought a house together I kept my flat and rented it out.  It is located not too far from Heathrow and was valued at just over £300k five years ago.  The flat is rented.  We put a mortgage on it when we bought the house so that we could claim tax-relief on the interest whilst having a smaller mortgage on the house.  The  mortgage on our house is just under £100K and the mortgage on the flat is £100K.  At present I take around £440 per month from the flat after all costs, tax and contingency fund. 
Taxation on the income from the flat has become more onerous in recent years and I am also mindful of potential further changes to the income tax as well as capital gains tax as the Chancellor seeks to gain additional tax revenue.  (Although I appreciate that, at this stage, nothing is case in stone yet)  With that in mind I have considered selling - albeit not in this market but in a year or so when the world resembles something like normal.  However, the question is, if I did sell, what could I do with the proceeds?  Lets say that I came away from it with £180K.  My currently salary is mid £50K and I currently salary sacrifice 32% of my salary so that I stay under the 40% tax bracket.  If sold, I see an advantage in getting the maximum I can into my pension to claim the tax relief.  I do not see the point in paying off the mortgage on the house as the interest rate is so low - although having access to funds to do so should we decide to retire is an attractive proposition.  In am 58, my pension pot is currently worth circa £250K and I have a DB pension that will give me £5K per year from the age of 62. 
So, opinions guys and girls, how best can I best make the proceeds work for me if I sell?  I am happy with medium or medium + risk and I won't be buying Bitcoin.          

MaxiRobriguez

You sound like you have considered your options well already.

The benefit of maintain the property is the leverage you can use on it. The difficulty with pushing more into pension is you're likely to end up with underlying assets which may be more volatile.

Could you take a middle approach? LTV on the flat is 33% - could you increase that and use the proceeds to push more into pension. That means rather than a complete lurch you just rebalance. I understand there are some concerns about increase of tax on BTL but my hunch is that a lot of that will fall on new entrants rather than existing landlords, and a lot will fall on individual landlords rather than company vehicle landlords.

Another_Saver

In the immediate term, £50k each of premium bonds, £20k each will use up this year's ISA allowances, and then make up the difference if you aren't fully using your full annual pension allowance, the rest... General investment account or cash until the new tax year, and so on.
Longer term, stick as much as you can into your pensions and ISAs every year til it runs out, for a platform iWeb is probably the cheapest, especially if you're only going to hold one multi-asset fund (I prefer Vanguard lifestrategy, HSBC global strategy are popular, others are available).

Given your age, that your post indicates reasonable security, if you will both have a full NI record to claim the max state pension, I think you could comfortably go for VLS 80/HSBC Dynamic, though VLS 60 or HSBC balanced is generally considered more "medium" risk.
It all depends on what you want the proceeds to do. Do you want an extra (say a conservative 3% withdrawal rate) £5-£6k pa income? Do you want extra cash savings? Do you want to have fun with it now before you get too old? Do you want to put it aside for care expenses? 

Albermarle

If you salary sacrifice as much as possible ( down to minimum wage level ) you will still see a tax benefit from the basic rate relief - 6.25% overall normally 
I have considered selling - albeit not in this market but in a year or so when the world resembles something like normal.
In general the property market is surprisingly lively so probably would not be a bad time to sell . Although the proximity to Heathrow is not that positive at the moment as it is ( was ) the main employer in the area.

MEM62

Albermarle said:

In general the property market is surprisingly lively so probably would not be a bad time to sell . Although the proximity to Heathrow is not that positive at the moment as it is ( was ) the main employer in the area.

Historically, flats in the area have sold around the £300k mark or just above for the past five years or so.  Currently, there are two for sale in our development.  This in itself is highly unusual as owners tend to be long-term - myself and four other neighbours have owned our flats for over thirty years.  These are currently up for £250K as flats in the area are not selling although houses are.  I won't sell at that price and expect it won't be too long before the values return to nearer their normal levels.  It's not the right time for me to sell.