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Pension maxed out, where to invest surplus?

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    Pension maxed out, where to invest surplus?

    Hi,

    I've tried searching the forums, but haven't found anything exactly like my situation although this thread from a few years ago has a good general discussion on making pension contributions from limited companies.

    My situation is that I have a final salary pension in payment from an old employer, plus a SIPP that I have been paying into since starting contracting, and I'm now close to hitting the lifetime allowance. I'm generating around a £50k surplus a year, and with my pension and personal savings feel I have sufficient warchest to see me through time on the bench, so the question now is what to do with the surplus?

    A friend, who has been contracting for longer, has built up quite a sizeable property portfolio and recommends buy to let. I already let out one house, outside the company, so an option might be for the company to buy this house from me, then over the next few years I can use the surplus to pay down the mortgage. I asked my accountant what he thought but he was very non-committal, but also couldn't offer any alternative investment approaches. So has anyone here got any advice?

    Thanks, Steve

    #2
    Do you have a partner, and is their pension pot also approaching the LTA? If not, then stash more in there. There's probably not much of a case for suddenly paying your partner (as an employee) a £40k employer's pension contribution, but if you pay yourself money as dividends into a joint account, and then he/she makes employee pension contributions up to the max using the dividend funds, then that's still reasonably tax efficient.

    I had the impression that recent changes made buy-to-let a bit less appealing now, but it's not something I would do personally for other reasons, so I have never looked that deeply into it.

    Comment


      #3
      Originally posted by Lambert Simnel View Post
      I had the impression that recent changes made buy-to-let a bit less appealing now.
      Yep I was considering jumping on this but seems there's been some significant changes tax-wise which makes it less attractive. True?
      Clarity is everything

      Comment


        #4
        My accountant has always warned me off buying property through my LtdCo as a sideline. Different if I were to move into that area and make it a focus of my business. Worth getting some professional advice on it as I never really bothered persuing it.

        Comment


          #5
          Originally posted by Lambert Simnel View Post
          Do you have a partner, and is their pension pot also approaching the LTA? If not, then stash more in there. There's probably not much of a case for suddenly paying your partner (as an employee) a £40k employer's pension contribution, but if you pay yourself money as dividends into a joint account, and then he/she makes employee pension contributions up to the max using the dividend funds, then that's still reasonably tax efficient.
          I do pay her dividends, which she then uses as income while salary sacrificing into her pension to recoup the tax. Having had two failed marriages there's a limit to how many assets I'm prepared to hand over to someone else though Also, I'm not sure how generous you can be in terms of pensions contributions to a director who isn't an active employee in the company. In fact, if the company had a property management arm then she could run it, which might then open up opportunities for more creativity in sharing the assets.

          Originally posted by Lambert Simnel View Post
          I had the impression that recent changes made buy-to-let a bit less appealing now, but it's not something I would do personally for other reasons, so I have never looked that deeply into it.
          The recent changes are to not allow mortgage payments as an allowable expense for personal Buy To Lets, but that isn't the case when doing it though a property company. That's one of the reasons I was thinking of moving my existing BTL (the house I lived in before getting together with my partner) into the company. Looking forward a few years I might eventually retire from the contracting and continue managing the properties for retirement income...

          So you can see the appeal, but I'm not sure what other alternative investments are out there?

          Comment


            #6
            Originally posted by SteelyDan View Post
            Yep I was considering jumping on this but seems there's been some significant changes tax-wise which makes it less attractive. True?
            Not if you are doing it within a company. There's several good tax cafe guides to property tax that are worth reading...

            Comment

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