If selling our rental properties... what next with the free proceeds ?

mjsc1

Hello Folks

I live in Scotland. Alongside my wife we jointly own 2 flats which we lease to tenants; tenants are in situ. Both flats are located in a small town in east Scotland.

In the light of proposed new legislation, we are considering selling both.

By way of background:-

Neither of the properties are mortgaged.

Combined monthly income from both rentals is £ 1200 - this sits in a LTD company bank and is periodically moved to a high interest (ha !) business savings account.

We hope to obtain £73 K for one and £105K for the other making £178k total. Valuations are 'Zoopla' estimates so either could sell for more or less...

We think our simplest options for investing the free proceeds are:-

1. ‘X’ into a low cost world index tracker/S&P 500 tracker within our respective ISA’s.

2. ‘X’ amount invested into our respective SIPP’s or even the max amount we can each put into the respective SIPP's.

We expect not to have to access the capital and whatever growth until 13/15 years from now; that's probably when we will call it quits on our jobs.

We are content for our funds to be invested in equities.

Our SIPP's, ISA's, the 2 flats and cash sitting in our LTD company bank accounts are the extent of our investments. We expect to clear our mortgage on the matrimonial home in 2.5 years.

I have taken only a rudimentary look at what is out there..... What other investment options are at our disposal ? We would prefer for simple investments - such as they might be !

Thanks for reading and thanks for any advice.

BoGoF

Have you factored in CGT liability to the available proceeds.

How will you get the money out the company in a tax-efficient manner?

What level of actual earnings do you have?

Marcon

mjsc1 said:

Hello Folks

I live in Scotland. Alongside my wife we jointly own 2 flats which we lease to tenants; tenants are in situ. Both flats are located in a small town in east Scotland.

In the light of proposed new legislation, we are considering selling both.

By way of background:-

Neither of the properties are mortgaged.

Combined monthly income from both rentals is £ 1200 - this sits in a LTD company bank and is periodically moved to a high interest (ha !) business savings account.

We hope to obtain £73 K for one and £105K for the other making £178k total. Valuations are 'Zoopla' estimates so either could sell for more or less...

We think our simplest options for investing the free proceeds are:-

1. ‘X’ into a low cost world index tracker/S&P 500 tracker within our respective ISA’s.

2. ‘X’ amount invested into our respective SIPP’s or even the max amount we can each put into the respective SIPP's.

We expect not to have to access the capital and whatever growth until 13/15 years from now; that's probably when we will call it quits on our jobs.

We are content for our funds to be invested in equities.

Our SIPP's, ISA's, the 2 flats and cash sitting in our LTD company bank accounts are the extent of our investments. We expect to clear our mortgage on the matrimonial home in 2.5 years.

I have taken only a rudimentary look at what is out there..... What other investment options are at our disposal ? We would prefer for simple investments - such as they might be !

Thanks for reading and thanks for any advice.

There is so little information in your thread (nothing about the value of your SIPPs, ISAs, whether you are on track for a full state pension, attitude to risk, health, security of jobs etc) which would enable anyone to comment on an informed based. 

Sometimes in life the best advice is to take advice - the sort you pay for, based on a full understanding of all your circumstances. This would seem to be just such an occasion, and preferably before you take any decisive action in terms of selling either or both of your properties and/or tying up the funds. 

Grumpy_chap

BoGoF said:

Have you factored in CGT liability to the available proceeds.

How will you get the money out the company in a tax-efficient manner?

What level of actual earnings do you have?

No CGT on assets held within Ltd Co.  Corporation Tax will apply plus whatever taxes apply on drawing from the Ltd Co.

mjsc1

Marcon said:

mjsc1 said:

Hello Folks

I live in Scotland. Alongside my wife we jointly own 2 flats which we lease to tenants; tenants are in situ. Both flats are located in a small town in east Scotland.

In the light of proposed new legislation, we are considering selling both.

By way of background:-

Neither of the properties are mortgaged.

Combined monthly income from both rentals is £ 1200 - this sits in a LTD company bank and is periodically moved to a high interest (ha !) business savings account.

We hope to obtain £73 K for one and £105K for the other making £178k total. Valuations are 'Zoopla' estimates so either could sell for more or less...

We think our simplest options for investing the free proceeds are:-

1. ‘X’ into a low cost world index tracker/S&P 500 tracker within our respective ISA’s.

2. ‘X’ amount invested into our respective SIPP’s or even the max amount we can each put into the respective SIPP's.

We expect not to have to access the capital and whatever growth until 13/15 years from now; that's probably when we will call it quits on our jobs.

We are content for our funds to be invested in equities.

Our SIPP's, ISA's, the 2 flats and cash sitting in our LTD company bank accounts are the extent of our investments. We expect to clear our mortgage on the matrimonial home in 2.5 years.

I have taken only a rudimentary look at what is out there..... What other investment options are at our disposal ? We would prefer for simple investments - such as they might be !

Thanks for reading and thanks for any advice.

There is so little information in your thread (nothing about the value of your SIPPs, ISAs, whether you are on track for a full state pension, attitude to risk, health, security of jobs etc) which would enable anyone to comment on an informed based. 

Sometimes in life the best advice is to take advice - the sort you pay for, based on a full understanding of all your circumstances. This would seem to be just such an occasion, and preferably before you take any decisive action in terms of selling either or both of your properties and/or tying up the funds. 

Hello and thanks for your comments; in the circumstances, we had also planned to seek financial advice from a professional.

Albermarle

mjsc1 said:

Marcon said:

mjsc1 said:

Hello Folks

I live in Scotland. Alongside my wife we jointly own 2 flats which we lease to tenants; tenants are in situ. Both flats are located in a small town in east Scotland.

In the light of proposed new legislation, we are considering selling both.

By way of background:-

Neither of the properties are mortgaged.

Combined monthly income from both rentals is £ 1200 - this sits in a LTD company bank and is periodically moved to a high interest (ha !) business savings account.

We hope to obtain £73 K for one and £105K for the other making £178k total. Valuations are 'Zoopla' estimates so either could sell for more or less...

We think our simplest options for investing the free proceeds are:-

1. ‘X’ into a low cost world index tracker/S&P 500 tracker within our respective ISA’s.

2. ‘X’ amount invested into our respective SIPP’s or even the max amount we can each put into the respective SIPP's.

We expect not to have to access the capital and whatever growth until 13/15 years from now; that's probably when we will call it quits on our jobs.

We are content for our funds to be invested in equities.

Our SIPP's, ISA's, the 2 flats and cash sitting in our LTD company bank accounts are the extent of our investments. We expect to clear our mortgage on the matrimonial home in 2.5 years.

I have taken only a rudimentary look at what is out there..... What other investment options are at our disposal ? We would prefer for simple investments - such as they might be !

Thanks for reading and thanks for any advice.

There is so little information in your thread (nothing about the value of your SIPPs, ISAs, whether you are on track for a full state pension, attitude to risk, health, security of jobs etc) which would enable anyone to comment on an informed based. 

Sometimes in life the best advice is to take advice - the sort you pay for, based on a full understanding of all your circumstances. This would seem to be just such an occasion, and preferably before you take any decisive action in terms of selling either or both of your properties and/or tying up the funds. 

Hello and thanks for your comments; in the circumstances, we had also planned to seek financial advice from a professional.

Make sure it is an Independent Financial Advisor, preferably based locally, rather than a national firm of wealth advisors and the like.

Grumpy_chap

Albermarle said:.

Make sure it is an Independent Financial Advisor, preferably based locally, rather than a national firm of wealth advisors and the like.

The OP may need an Accountant as well as an IFA so that they can work together and provide a coherent strategy.

There is equity from the properties to be sold, within the OP's Ltd Co.
There is a SIPP, to which the equity can transfer from the Ltd Co with relative ease (subject to limits).
There are ISA's which require the equity is drawn from the Ltd Co first and subject to appropriate taxation on extraction from the Ltd Co.
There is employment income (unconnected jobs).
There are options for timing drawings from the Ltd Co. which can increase flexibility.

It is not clear exactly what assets are within the Ltd CO. and which are held outside the Ltd Co.

The OP refers to "simplest" solutions:

mjsc1 said:

We think our simplest options for investing the free proceeds are:-

1. ‘X’ into a low cost world index tracker/S&P 500 tracker within our respective ISA’s.

2. ‘X’ amount invested into our respective SIPP’s or even the max amount we can each put into the respective SIPP's.

Option (1) is not wholly simple as the funds cannot be invested into an ISA until after the funds have been drawn from the Ltd Co.  That means either Corporation Tax and then draw Dividends which will suffer Income Tax or salary which will suffer employers and employees NI plus Income Tax.

Option (2) is simpler as the Ltd Co. can make employer contributions direct to the pension funds, assuming available annual allowances (plus carry forward) are available.