Significant amount from property sale - what to do with the money

mr_auspicious

Hi

Genuinely asking for a friend, a relative in fact.

He has sold a property abroad and is dealing with all the Capital gains tax implications in that country.  Also transferring the money at the best Xg rate.

He is a single father, on a low income, home owner mortgage-free, no savings, no pension, no other investments, one dependent child.

He has £100,000 after CGT.  He has dual US/UK citizenship which means opening any ISA is very complicated.  It could be that he will but in order to do so he will need financial advice which I am helping him find (I am a part trained accountant with a reasonable understanding of investing but am not an adviser myself).

He's careful with his money, and is risk averse.  He would like to be able to have access to some cash for home improvements and emergencies.  He isn't looking to use it for an income, it's very important to him to pay the tax he's due and make only ethical investments.  He wants to keep it simple - he doesn't want to invest in anything that will make more work for him in the future.

My thinking is that at 55 with no pension he should invest half of it in an ethical SIPP and the rest in cash.  He hasn't used any of his pension allowances so far, his income over the last three years should mean he can put the full £50k into a SIPP and receive the tax breaks from the government.  When interest rates drop he can think about investing more in his pension or an ethical stocks and shares account (non ISA) but theres a complication with his dual citizenship about which funds he could invest in which would need to be considered.

Does this sound sensible or is there anything else relatively simple that we're missing?

Thanks in advice for any help

ColdIron

mr_auspicious said:

his income over the last three years should mean he can put the full £50k into a SIPP and receive the tax breaks from the government.

He is limited by his relevant earnings in the current year

To make use of carry forward for previous years he would need to exhaust the current annual allowance of £60k and have earnings in the current year to support those contributions

mr_auspicious

ColdIron said:

mr_auspicious said:

his income over the last three years should mean he can put the full £50k into a SIPP and receive the tax breaks from the government.

He is limited by his relevant earnings in the current year

To make use of carry forward for previous years he would need to exhaust the current annual allowance of £60k and have earnings in the current year to support those contributions

Thanks

So right now he would not be able to invest any more than his earnings over the last year?  

mr_auspicious

LuciJames said:

It sounds like your plan to split the £100,000 between a SIPP and cash is a solid starting point. The SIPP is a great choice for tax advantages, especially since your relative has unused pension allowances. If he’s risk-averse, an ethical, low-risk SIPP (such as one with government bonds or ethical funds) would align with his goals of keeping things simple. Holding the rest in cash for immediate needs or home improvements is a prudent move, especially given his cautious approach.

However, the dual citizenship issue complicates things, particularly with investment options and tax implications, as he may need to be mindful of US tax reporting requirements (like FATCA) when selecting funds. Seeking financial advice specifically addressing these complexities, especially regarding ethical investments and US-UK dual taxation issues, is a good next step.

Additionally, if he’s comfortable with limited risk, he could consider placing some of the cash into low-risk, ethical bonds or a high-interest savings account to generate some return without tying up funds in volatile assets. But overall, a balanced, low-maintenance approach seems to be the right direction. Make sure to factor in emergency fund needs too.

It's worth discussing these points further with a financial adviser who understands cross-border taxation and ethical investing to ensure all angles are covered.

Thanks very much for the detailed reply

Martico

mr_auspicious said:

LuciJames said:

It sounds like your plan to split the £100,000 between a SIPP and cash is a solid starting point. The SIPP is a great choice for tax advantages, especially since your relative has unused pension allowances. If he’s risk-averse, an ethical, low-risk SIPP (such as one with government bonds or ethical funds) would align with his goals of keeping things simple. Holding the rest in cash for immediate needs or home improvements is a prudent move, especially given his cautious approach.

However, the dual citizenship issue complicates things, particularly with investment options and tax implications, as he may need to be mindful of US tax reporting requirements (like FATCA) when selecting funds. Seeking financial advice specifically addressing these complexities, especially regarding ethical investments and US-UK dual taxation issues, is a good next step.

Additionally, if he’s comfortable with limited risk, he could consider placing some of the cash into low-risk, ethical bonds or a high-interest savings account to generate some return without tying up funds in volatile assets. But overall, a balanced, low-maintenance approach seems to be the right direction. Make sure to factor in emergency fund needs too.

It's worth discussing these points further with a financial adviser who understands cross-border taxation and ethical investing to ensure all angles are covered.

Thanks very much for the detailed reply

That looks very much like an AI-generated reply, just so that you're aware. 

ColdIron

mr_auspicious said:

ColdIron said:

mr_auspicious said:

his income over the last three years should mean he can put the full £50k into a SIPP and receive the tax breaks from the government.

He is limited by his relevant earnings in the current year

To make use of carry forward for previous years he would need to exhaust the current annual allowance of £60k and have earnings in the current year to support those contributions

Thanks

So right now he would not be able to invest any more than his earnings over the last year?  

That's right and the contributions would be gross, i.e. including tax relief. If his relevant earnings in the current year were £20k he would add £16k and receive £4k relief

mr_auspicious said:

Thanks very much for the detailed reply

It's an AI response someone has just copy/pasted. It's been marked as spam already

mr_auspicious

Thanks for the heads up.  It wasn't an AI response, I'll know in future though

AlanP_2

mr_auspicious said:

ColdIron said:

mr_auspicious said:

his income over the last three years should mean he can put the full £50k into a SIPP and receive the tax breaks from the government.

He is limited by his relevant earnings in the current year

To make use of carry forward for previous years he would need to exhaust the current annual allowance of £60k and have earnings in the current year to support those contributions

Thanks

So right now he would not be able to invest any more than his earnings over the last year?  

If they are less than £60k then yes, if more then Carry Forward of Annual Allowance might be possible.