What folks do with SIPPs?

[gazelle]

Hi All,

I'm finally looking to pull the trigger on my LTD and go MVL. There is a few hundred K in the LTD. My accountant just does basic filing and compliance and never suggested anything about pension contributions via SIPP previously.

I had opened a HL SIPP during previous accounting period and put £80 from personal bank account into. As I understand from reading on this forum and elsewhere, that you can then claim upto £40k each year previously that you hadn't contributed as long as you had an open SIPP.

So I'm guessing I could put 2 years worth into SIPP i.e. £80k and claim back 19% Corp Tax = £15,200 - which is no small sum. Then MVL the rest and pay the 10% capital gains.

Also, I'm now inside and I could transfer an amount of my PAYE to SIPP to bring me under £50k higher rate and save on Employers NI and Employees NI.

The only thing is, I don't know what do with the SIPP and was hoping to get some ideas from fellow peeps who have been doing this who could give some tips and hopefully avoid what pitfalls are out there in SIPP land.

I used to trade shares in the 2000-2008 range and made and then lost a fortune (Marconi <cough><spit><cough>).
As Sods law would have it, the markets (US) have had an amazing run ever since. But now markets look like they could come crashing down, seems to be propped up with fed money. So I'm a bit hesitant to invest in markets as knowing my luck, they'll crash soon afterwards.

it's been a year since I my outside gig finished and now seem to be in inside roles.

I have some BTL personally which was going to be my pension.


Seems a waste of money not to take advantage of these tax breaks on SIPP - but then not sure what to do with it.

Any ideas?

Thanks.

P.S Before anyone says ask your accountant - he just does basic compliance and filing - he's given me some dud advice before and made some ridiculous mistakes
P.P.S Before anyone says do a search on this forum - yes, I will be doing that too - but thought it may be worth asking given the situation I'm in.

[northernladuk]

Before anyone says do a search on this forum - yes, I will be doing that too

Doing this first means that this wouldn't have been a guess and answers your question.

So I'm guessing I could put 2 years worth into SIPP i.e. £80k and claim back 19% Corp Tax = £15,200 - which is no small sum. Then MVL the rest and pay the 10% capital gains.

Also, I'm now inside and I could transfer an amount of my PAYE to SIPP to bring me under £50k higher rate and save on Employers NI and Employees NI.

Only if your umbrella will let you allow you to contribute to your own SIPP else you'll have to go with their offering.

I don't know what do with the SIPP

What do you mean don't know what to do wit a SIPP? You put money in to it and then use it when you retire.

If you MVL and gain a tax advantage you cannot open another company for two years so if you do find an outside gig you are stuck with a brolly in that period.

[Lance]

talk to a pension adviser

I'm not sure about the logistics of claiming back CT for previous years AND doing an MVL.
You might want to consider cutting your losses and just crack on with the capital distribution.
Or get a new accountant.

[northernladuk]

talk to a pension adviser

This. Making decisions on 100's of K of money based on comments from other contractors isn't the best move

[eek]

talk to a pension adviser

I'm not sure about the logistics of claiming back CT for previous years AND doing an MVL.
You might want to consider cutting your losses and just crack on with the capital distribution.
Or get a new accountant.

+1 - retrospectively paying into a SIPP and claiming back CT just sounds like a world of complete pain for zero real benefit.

Just take the whole lot out via MVL and as it's a better deal than putting it into a pension and paying tax when you remove it later.

As for your pension what you really should be doing is throwing as much as possible into your pension from your inside roles via Salary Sacrifice and using the MVL money when it finally arrives to live on if so required.

[gazelle]

Doing this first means that this wouldn't have been a guess and answers your question.

Man, I'd knew you'd be wading in with something obtuse ok, it wasn't a guess - it's from what I've gleaned from these forums that I could do and claim back a decent amount of money. Happy now

Only if your umbrella will let you allow you to contribute to your own SIPP else you'll have to go with their offering.

Yes, I went with an umbrella that does allow you to choose your own SIPP

What do you mean don't know what to do wit a SIPP? You put money in to it and then use it when you retire.

From what I understand, a SIPP is nothing more than a wrapper, you choose what investments you wish to invest into - be that individual shares, active managed funds, passive funds, trackers etc I believe you can also invest in commercial property - which is probably one of the options I may look into.
I thought I'd get a flavouring to see what everyone else is doing and see how they are finding things. Those that invested in the stockmarket a few years ago, I imagine are sitting pretty.

If you MVL and gain a tax advantage you cannot open another company for two years so if you do find an outside gig you are stuck with a brolly in that period.

I was previously over 4 years at the same client (outside). You were very strongly suggesting (in previous posts) that I should close LTD due to I'll be prime pickings. The contracts I seem to be getting seem to be on the inside. My other option is, I could take out qdos insurance (they do say they will represent prior contracts as well), and keep LTD - but there is a wad of cash in there and no efficient way of extracting it out.

[northernladuk]

Man, I'd knew you'd be wading in with something obtuse ok, it wasn't a guess - it's from what I've gleaned from these forums that I could do and claim back a decent amount of money. Happy now

As happy as a Yorkshire man can be yes

From what I understand, a SIPP is nothing more than a wrapper, you choose what investments you wish to invest into - be that individual shares, active managed funds, passive funds, trackers etc I believe you can also invest in commercial property - which is probably one of the options I may look into.
I thought I'd get a flavouring to see what everyone else is doing and see how they are finding things. Those that invested in the stockmarket a few years ago, I imagine are sitting pretty.

Ah so you are asking how to invest the money, not what to do with the SIPP as a whole. Gotcha. That's a really difficult one. I've also made mistakes investing, my 'safe' paypal shares are getting an absolute hammering so I'm not the person to ask either. I didn't listen to AtW and his AMD has been the best stock picked on the forums to date. Vanguard LifeStrategy 100% and the like seem to be the got to for most posters that have commented though so a good look. I would be talking to an IFA if you don't know what to do though. Might cost a bit but as you've seen already it can be money well spent.

I was previously over 4 years at the same client (outside). You were very strongly suggesting (in previous posts) that I should close LTD due to I'll be prime pickings. The contracts I seem to be getting seem to be on the inside. My other option is, I could take out qdos insurance (they do say they will represent prior contracts as well), and keep LTD - but there is a wad of cash in there and no efficient way of extracting it out.

It's a tough one and not a situation I've been in so hard to say what to do when facing this. All I'm saying is make sure you've thought MVL through very carefully. We've already got a trickle of people that knee jerk MVL'd their company with the first inside gig they took and it's ended and they want to go outside again. I expect that's going to grow steadily as the more inside gigs come to an end.

[gazelle]

talk to a pension adviser

I'm not sure about the logistics of claiming back CT for previous years AND doing an MVL.
You might want to consider cutting your losses and just crack on with the capital distribution.
Or get a new accountant.

Good point - will do that as well.
Wouldn't be doing both at the same time, will get the CT back, then do MVL. But yes, take your point it maybe worth cutting my losses. Also an option - just trying to get all the facts and figures and then trying to make decision.

This. Making decisions on 100's of K of money based on comments from other contractors isn't the best move

Well, I think they are some very clever people on these forums and we all tend to have the same sorts of issues from time to time. No doubt, others will have already gone down the SIPP road, which is new to me, would be interested to know how others have used their SIPP, might prove beneficial or help avoid making the wrong investment.

+1 - retrospectively paying into a SIPP and claiming back CT just sounds like a world of complete pain for zero real benefit.

Just take the whole lot out via MVL and as it's a better deal than putting it into a pension and paying tax when you remove it later.

As for your pension what you really should be doing is throwing as much as possible into your pension from your inside roles via Salary Sacrifice and using the MVL money when it finally arrives to live on if so required.

Fair point

[eek]

Fair point

It's more than a fair point.


If you take the pension from your limited company you save yourself 29% tax (19% corporation tax, 10% on MVL rate)

£1 in salary sacrifice on your pension will save you something like 54% (40% income tax, 13.9% employer NI & Apprenticeship levy).

[Maslins]

+1 - retrospectively paying into a SIPP and claiming back CT just sounds like a world of complete pain for zero real benefit.

Just take the whole lot out via MVL and as it's a better deal than putting it into a pension and paying tax when you remove it later.

As for your pension what you really should be doing is throwing as much as possible into your pension from your inside roles via Salary Sacrifice and using the MVL money when it finally arrives to live on if so required.

I'd go with this too. The personal tax/NIC saving from putting more of your new salary into a pension will almost certainly outweigh the corporation tax you might otherwise save by making company contributions.