Lump sum -- how to invest?

it_doesnt_work

Hi, we just sold a rental property and have around £150k to invest/save.

I'm 55, working, and maxxed out on pension contributions, used up carryforwards, and £20k ISA this year.

My SIPP + work DBC is worth around £700k. My ISA around £100k.

My wife is 50, works part-time earning around £8k pa, plus gets around £15k pa from rent. She has no personal pension and not used £20k ISA for this year.

I'll put £20k in wife's ISA this year, and we'll add our 2x£20k ISAs in April.

That would leave around £90k. If I invest this outside a tax wrapper in say a standard ESG fund, any gain would be subject to CGT. But I guess we could just sell off a bit every year when we needed the money wso that we stay within the CGT allowance, currently £24k, right? 

Is it also worth setting up a SIPP for my wife and how much could she contribute -- 3x£8k = £24k?

Many thanks for any ideas.

Dazed_and_C0nfused

Is it also worth setting up a SIPP for my wife and how much could she contribute -- 3x£8k = £24k?

She could only contribute £8k gross.  Carry forward wouldn't be an option (assuming that's what the 3x refers to).

And her normal contributions would need to be taken into account.

Linton

One can contribute up to one's earned income in pensions in any tax year.   Is she eligible for and paying into an employer's pension?

Assume no employer's pension and her pay is £8K.  Then £8K gross can be contributed into a personal pension such as a SIPP.   That would be £6K actually paid into the SIPP with HMRC adding the extra £2K.   You cannot pay into a previous year's pension and there is no carry forward of earnings from one year to the next.

So I dont see where your 3X£8K comes from.

The £12300 CGT allowance refers to the profit made.  So you could take 2X£20K each year from your non-sheltered investments to move into S&S ISAs as that money is very unlikely to include £12300 profit 

MX5huggy

The CGT allowance £12300 and the dividend allowance of £2000 means £100k plus is likely to be needed before tax will be due on investments outside a ISA or SIPP. 

xylophone

Have you both checked your state pension forecasts?

https://www.gov.uk/check-state-pension

Dazed_and_C0nfused

Linton said:

One can contribute up to one's earned income in pensions in any tax year.   Is she eligible for and paying into an employer's pension?

Assume no employer's pension and her pay is £8K.  Then £8K gross can be contributed into a personal pension such as a SIPP.   That would be £6K actually paid into the SIPP with HMRC adding the extra £2K.   You cannot pay into a previous year's pension and there is no carry forward of earnings from one year to the next.

So I dont see where your 3X£8K comes from.

The £12300 CGT allowance refers to the profit made.  So you could take 2X£20K each year from your non-sheltered investments to move into S&S ISAs as that money is very unlikely to include £12300 profit 

HMRC aren't quite that generous, it would be a payment on £6,400 with tax relief of £1,600 🙂

it_doesnt_work

Thanks for all the advice. I thought we could use the unused parts of my wife's past three year's pension allowance, but I guess that's wrong.

Probably makes most sense to set up a general trading account and migrate it into the ISAs over time.

MallyGirl

it_doesnt_work said:

Thanks for all the advice. I thought we could use the unused parts of my wife's past three year's pension allowance, but I guess that's wrong.

Probably makes most sense to set up a general trading account and migrate it into the ISAs over time.

carry forward is only relevant if you earn more than £40k - which is the annual contribution limit - and you want to contribute more than £40k. You are always limited by what you earn in the first place

Albermarle

Thanks for all the advice. I thought we could use the unused parts of my wife's past three year's pension allowance, but I guess that's wrong.

Probably the most misunderstood pension rule that there is .

For some reason lots of new posters are aware that there is a carry forward rule from the last three years ( not sure how so many people are aware of a relatively obscure rule) but are unaware it only applies to unused annual allowance that can be brought forward, and you can not bring unused tax relief forward. So for most they remain limited in the maximum they can contribute is the gross of their annual employment earnings .

I guess some poor reporting/articles in the Daily Mail etc are the culprit for the misunderstanding.