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Advice needed - Is a GIA the best option after ISA is utilised?
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Related questions please:
Are dividend payments on funds in a GIA liable to tax as income (20%) or as dividends? Assuming my £1000 tax free slice is used up elsewhere
If a part of the GIA is transferred on April 6 of a new tax year does a CGT gain/loss arise on the funds transferred?0 -
schiff said:Related questions please:
Are dividend payments on funds in a GIA liable to tax as income (20%) or as dividends? Assuming my £1000 tax free slice is used up elsewhere
If a part of the GIA is transferred on April 6 of a new tax year does a CGT gain/loss arise on the funds transferred?
CGT arises from disposals (rather than 'transfers'), regardless of which date they're made.1 -
Advice needed - Is a GIA the best option after ISA is utilised?Sometimes yes. Sometimes no.
Pension wrapper should be considered (its better than ISA for most people who are not touching the money until 57+)
offshore bond and onshore bond are the other wrappers. These have been largely out of play with the higher CGT allowance and lower CGT band. But with the lower CGT allowance and higher tax rate, they have come back into play again. But typically for larger investors.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.1 -
OP -
Very likely your workplace pension is a Defined Contribution ( DC) type .
A Sipp is also a DC pension.
So legally and tax wise they both operate the same way.
Differences will be in the fee/charges structure and the range of investments on offer.
As explained in a previous post there can be advantages to adding more to your work pension, depending on how your employer takes your contributions from your salary.1 -
AlanP_2 said:Regarding the contribution limitations, is it a 60k limit for the year if your salary is higher. So I would need to workout how much my company pension will roughly total this year and then subtract e.g. 10k in company pension contributions would mean I can contribute 50K? or a smaller amount but I would get basic/higher tax relief automatically?
Unpicking this as there are multiple aspects in that paragraph.
There are TWO contribution limits you need to be aware of:
1) Income Limit - You cannot contribute more than your salary in a year basically. This includes the basic rate tax relief added if it is a Relief at Source scheme but DOES NOT include employer contributions. As both "normal" employer contributions and Salary Sacrifice contributions are paid by the employer they do not get included in this limit.0 -
eskbanker said:schiff said:Related questions please:
Are dividend payments on funds in a GIA liable to tax as income (20%) or as dividends? Assuming my £1000 tax free slice is used up elsewhere
If a part of the GIA is transferred on April 6 of a new tax year does a CGT gain/loss arise on the funds transferred?
CGT arises from disposals (rather than 'transfers'), regardless of which date they're made.1 -
HHarry said:isayhello said:ColdIron said:A SIPP/pension is very tax efficient, far more so than a GIA. Tax relief on the way in, especially useful if you pay 40% now but expect to pay 20% once retired. 25% tax free on withdrawal so the worst case means you are 6.25% better off. If you retire early you may pay no or very low tax. I retired at 56 and took out £12,000 a year for 10 years entirely untaxedContribution limitations may mean you still need your GIA so splitting between GIA/SIPP could be a good balance for you. I certainly wouldn't avoid pensions
You put £100 in your pension. Later on you can take out £25 tax free, and pay 20% tax on the remaining £75 (which is £15 in tax). Overall you have £85 in your pocket. Which is 6.25% more.0 -
kempiejon said:isayhello said:EthicsGradient said:It does depend on when you want to use the money. With a SIPP, you get the tax advantage when contributing, it can grow free of income tax on dividends, or CGT, 25% comes out tax free, and the rest at your then tax rate - which may be lower than now. But yes, over 15 years before you can access it, so if that may be a problem, it may not be the right route for you.
Are you going to have the income to contribute to ISAs in future years, or would the full 20k/year be able to come from the 100k you now have in the GIA? If the latter, you may be able to sell from it and contribute at a rate that avoids CGT, so that the GIA investments don't attract that much tax (a bit of income tax on dividends is probably inevitable). In which case you'd do OK, and still have access to it all if needed, when you want.
I hope to be able to keep adding to the ISA or GIA from earnings for the next 10-15 years but I would try to sell from the GIA and then buy immediately in the ISA, I think that would cost me some tax if the fund went above 3k but hopefully not too much.0 -
jimjames said:kempiejon said:isayhello said:EthicsGradient said:It does depend on when you want to use the money. With a SIPP, you get the tax advantage when contributing, it can grow free of income tax on dividends, or CGT, 25% comes out tax free, and the rest at your then tax rate - which may be lower than now. But yes, over 15 years before you can access it, so if that may be a problem, it may not be the right route for you.
Are you going to have the income to contribute to ISAs in future years, or would the full 20k/year be able to come from the 100k you now have in the GIA? If the latter, you may be able to sell from it and contribute at a rate that avoids CGT, so that the GIA investments don't attract that much tax (a bit of income tax on dividends is probably inevitable). In which case you'd do OK, and still have access to it all if needed, when you want.
I hope to be able to keep adding to the ISA or GIA from earnings for the next 10-15 years but I would try to sell from the GIA and then buy immediately in the ISA, I think that would cost me some tax if the fund went above 3k but hopefully not too much.0 -
AlanP_2 said:Regarding the contribution limitations, is it a 60k limit for the year if your salary is higher. So I would need to workout how much my company pension will roughly total this year and then subtract e.g. 10k in company pension contributions would mean I can contribute 50K? or a smaller amount but I would get basic/higher tax relief automatically?
Unpicking this as there are multiple aspects in that paragraph.
There are TWO contribution limits you need to be aware of:
1) Income Limit - You cannot contribute more than your salary in a year basically. This includes the basic rate tax relief added if it is a Relief at Source scheme but DOES NOT include employer contributions. As both "normal" employer contributions and Salary Sacrifice contributions are paid by the employer they do not get included in this limit.
2) Annual Allowance - HMRC limit of £60k of contributions (defined Benefit schemes have a special calculation but I am assuming you have a Defined Contribution work scheme) to a pension scheme per tax year. This DOES include employer contributions as well as the ones included in point 1. However if you were a member of a pension scheme in previous years you can use up to 3 years worth of Carry Forward of any unused AA from those periods.
It is up to you to calculate, track and manage contributions against both limits. HMRC will no doubt catch up eventually if you go over but who needs the hassle?
How much you can contribute over and above current contributions to your employer scheme and how much and the process for tax relief, both BR and HR, is applied depends on the structure of the pension you are using.
Some use Relief at Source where contributions come out of taxed income and the pension admin company add BR tax relief to all contributions and reclaim it from HMRC on your behalf. If you are a HR taxpayer you need to liaise with HMRC to claim the difference between HR and BR relief.
A new SIPP that you opened with say ii, HL, Fidelity, Vanguard would use this method. Some employer schemes do and some don't so you would need to look at your payslips / employer pension portal to work out what is going on.
Some employer schemes use Net Pay where contributions come out before any income tax calculation is done. This method would automatically give you tax relief at the appropriate rate whether that be 40%, 20% or even 0% if you earned less than your personal allowance and contributed to an employer pension.
Some employer schemes use Salary Sacrifice which is like Net Pay but with the added benefit of an NI saving as well as a tax saving.
Also if I can do this for the 3 previous years if it was the same setup, then I could contribute upto 180k - 30k contributions from myself and employer into the work pension so upto 150k? Giving a simple clear example just for my benefit.
Can I just contribute over this years allowance then into a SIPP and the company would be ok with it, or do you need to declare how much of it is for previous years?
It seems to be a good way to invest some funds based on previous answers to avoid tax on divs and cgt but also use the GIA for access to funds sooner, so split across both.0
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