What to do with 50K from property sale 12 to 18 months away from Drawdown

segovia

I am 12 to 18 months away from moving my SIPP into drawdown. I have 50k coming my way soon from a property sale, there is no CGT liability. Do I put it in my SIPP and take the £12.5K government contribution or put 20K in to a ISA put the balance 30K into my SIPP.  Or maybe split some on easy access deposit and SIPP ?    

Mark_d

How much you can get government contribution on will depend on your taxable earnings.  If you can't see yourself needing any of this cash in the next 12-18 months, then I would put as much as possible in to the SIPP and claim the government contribution.

I only use ISA where I might need the fund available before drawing on my pension

xylophone

I am 12 to 18 months away from moving my SIPP into drawdown.

You are under age 75?

Do you have relevant UK earnings?

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

segovia

xylophone said:

I am 12 to 18 months away from moving my SIPP into drawdown.

You are under age 75?

Do you have relevant UK earnings?

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

No, under 75 and will be retiring at the end of this year at 69

xylophone

If you have no relevant earnings, then you are limited as to the amount you can contribute to a pension and obtain tax relief.

See link above.

While under age 75 and with no relevant earnings, you may make a net contribution to your SIPP of  up to £2880 each tax year

and the provider will claim TR of up to £720 and add it to your pot.

segovia

xylophone said:

If you have no relevant earnings, then you are limited as to the amount you can contribute to a pension and obtain tax relief.

See link above.

While under age 75 and with no relevant earnings, you may make a net contribution to your SIPP of  up to £2880 each tax year

and the provider will claim TR of up to £720 and add it to your pot.

I am still working and relative earnings can justify a large contribution, it's a good question. If I were earning a minimum wage, could I still deposit a windfall limp sum in to a SIPP ?  

atush

yes, you can contribute up to your total relevant earnings, be it MW or not, less the BR tax which will be added.

xylophone

If I were earning a minimum wage, could I still deposit a windfall limp sum in to a SIPP ?

Notes battered by the breeze?

Yes, see link above.

Let's say a person aged under 75 has relevant earnings of £19,000 a year. 

He contributes to his workplace pension scheme (say £1000 per annum after tax relief is claimed by the provider).

He wins £20,000 on the lottery and decides he'd like to beef up his pension.

He makes a contribution of  £14,400  to the provider and the provider claims tax relief of  £3,600 and adds it to his pot.

MX5huggy

segovia said:

xylophone said:

If you have no relevant earnings, then you are limited as to the amount you can contribute to a pension and obtain tax relief.

See link above.

While under age 75 and with no relevant earnings, you may make a net contribution to your SIPP of  up to £2880 each tax year

and the provider will claim TR of up to £720 and add it to your pot.

I am still working and relative earnings can justify a large contribution, it's a good question. If I were earning a minimum wage, could I still deposit a windfall limp sum in to a SIPP ?  

These types of posts/questions are much easier if you give at least an approximation of your salary because the limits are and impacts are very much different for someone with little earnings compared with someone on £150k.

Do you have to option of paying into an employers pension via Salary Sacrifice? This would be the most tax efficient way of using up the £50k. It is also where the National Minimum Wage comes into play as a limit because you can’t sacrifice beyond reducing your income to NMW. 

segovia

MX5huggy said:

segovia said:

xylophone said:

If you have no relevant earnings, then you are limited as to the amount you can contribute to a pension and obtain tax relief.

See link above.

While under age 75 and with no relevant earnings, you may make a net contribution to your SIPP of  up to £2880 each tax year

and the provider will claim TR of up to £720 and add it to your pot.

I am still working and relative earnings can justify a large contribution, it's a good question. If I were earning a minimum wage, could I still deposit a windfall limp sum in to a SIPP ?  

These types of posts/questions are much easier if you give at least an approximation of your salary because the limits are and impacts are very much different for someone with little earnings compared with someone on £150k.

Do you have to option of paying into an employers pension via Salary Sacrifice? This would be the most tax efficient way of using up the £50k. It is also where the National Minimum Wage comes into play as a limit because you can’t sacrifice beyond reducing your income to NMW. 

I am a self-employed IT freelancer operating via my own LTD company and I have a property portfolio, I am a 40% taxpayer which indicates my salary thresholds.  

ColdIron

segovia said:

MX5huggy said:

segovia said:

xylophone said:

If you have no relevant earnings, then you are limited as to the amount you can contribute to a pension and obtain tax relief.

See link above.

While under age 75 and with no relevant earnings, you may make a net contribution to your SIPP of  up to £2880 each tax year

and the provider will claim TR of up to £720 and add it to your pot.

I am still working and relative earnings can justify a large contribution, it's a good question. If I were earning a minimum wage, could I still deposit a windfall limp sum in to a SIPP ?  

These types of posts/questions are much easier if you give at least an approximation of your salary because the limits are and impacts are very much different for someone with little earnings compared with someone on £150k.

Do you have to option of paying into an employers pension via Salary Sacrifice? This would be the most tax efficient way of using up the £50k. It is also where the National Minimum Wage comes into play as a limit because you can’t sacrifice beyond reducing your income to NMW. 

I am a 40% taxpayer which indicates my salary thresholds.  

With 40% tax, a SIPP contribution is by far a better route than ISA for the generous relief to you