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LLOYDS is going to FLY

lse:lloy

#2398

Indeed. It did seem like it might be too good to be true … such an obvious loophole.

I wonder what ‘reasons for doing so’ HMRC might see as valid …

Thanks for sharing. Definitely worth knowing about.


#2399

Quick question guys, I’ve not got a sipp or a pension. But you guys talking made me reas this article:

I’m not sure if you saw elsewhere on ii that I bought an ex-Lloyds bank recently.

Now I’m getting flashbacks of a friend of mine who put his business premises in a full sipp, his company pays rent and the rent goes in the sipp.

So could anyone point me in the right direction for educating myself on that scenario please and does anyone have any knowledge themselves of this?


#2400

What are you looking to do @swamp_rat? What’s your aim?
You looking to setup a DIY pension?
You looking to do something with your own Ltd company?

You’d be well advised to open an ISA if you only have a Broker account… unless there’s some reason you aren’t eligible?


#2401

I did see that you’d bought one, but i’m afraid I’m not qualified to comment on such a complex set-up.


#2402

Well I really don’t have an aim J Westlock. I have an ISA with 60k in and no pension. I have a few properties which I always thought I would provide a rental income in my seniority. Well once mortgages are paid.

But now I saw this thread and remembered someone putting commercial assets in a sipp, I am hoping the bank (it’s a cheap thing really, they sound grand but price of a cheap yorkshire terrace as it’s tired internally) once renovated would provide a further income to the other properties within a pension pot tax free.

But I am getting the feeling that currently a) I am missing out on a tax free sipp entirely and b) the bank could, if inserted into a full sipp, generate income which would return have to stay in the sipp but then act as a better pension fund meaning less income now but a future without the worry of not being able to pay my way.

ps I’m mid 40’s so I am well aware I am behind most folk when it comes to pensions. Had to work like a mad man to get to the current position, I will be ok once debts are gone though.


#2403

OK thanks for that.
Let me just mention some things that I know which may assist but I’m no expert on this… I’ve just read around it in the past.

You don’t want to put your residential property into a SIPP… the HMRC will hit you with a large tax bill if you do.
You can put your commercial property into a SIPP however. This is something that say a shop owner/small business might do.
My understanding is that you’d need to have enough in the SIPP already to purchase all or most of the property… and then the SIPP buys the commercial property and becomes the legal owner.

The SIPP receives the rental payments and pays zero tax on them.
If you are renting the property to your own business then the rent is still a tax-deductible expense… despite the fact your SIPP won’t pay tax on it.

From what you’ve said it doesn’t sound that you could class your properties as commercial… though might be wrong.

Do you have your own Ltd Co by the way ?

Anyways, at some point when it makes sense for you… it’s a good idea to start a pension… and in the absence of a scheme from your employer (or in addition)… a SIPP has tax advantages when paying money into it… so is usually beneficial.


#2404

I am sure we will.

Explained more than a dozen times already.

GL

soi


#2405

Thank you very much for the info JW, I do have the minor shareholding of a Ltd Co. 25%. That is a trading family business of many years also in a different commercial premises, currently struggling as a business.
Currently were splitting part of that building off to let 1st floor as residential.

My personal rental properties are two residential, one HMO so that could be classed commercial, but not sure, I’d have to check although from what you said about the tax hit, there would be limited reason.

Yes I will defo look into starting a pension, and I think a sipp sounds good. I see @Eadwig comments about £2,880 per annum. Any more needs a good reason. For myself I wonder would not having invested in a pension for the last near 3 decades as family business, never paid well enough and there was no structure in such an employer count as good reason? I dont have long to invest in one now.


#2406

Hi @swamp_rat, Well given the number of properties its sounds like you own it sounds like you should be well set for capital and income in your retirement. Though buy to letting isnt the great deal that it was at one point.

As I said in an earlier post, I never gave SIPPs a thought when I was working. I was in good occupational schemes with employers making significant contributions why did I need anything else I thought - and being busy working I never took it any further. I am regretting that now as the ability to put up to £40,000 a year in AND get an uplift on that according to your marginal tax rate AND build up a pot that will be IHT free (and which can be passed on to your relatives/dependants) are all things I would greatly value now - but having stopped working and retired the ability to build up a significant pot in a SIPP is no longer open to me (£2,880 a year is the maximum you can contribute if you aren’t working).

Even if you dont do the commercial property thing I would consider opening a SIPP anyway. If you dont have spare cash to put in it then why not take the money out of your ISA and put it in the SIPP to get the tax uplift ?. You just have to be careful when you are taking money out (which you cant do till your 55 anyway I think) as ANYTHING you withdraw counts as income and is taxed at your marginal tax rate. This has caught out many enthused by the new pension freedoms who have withdrawn big lump sums only to be clobbered with a big tax bill.

I can only suggest that you give serious consideration to SIPPs as its seems to me that they have many useful benefits and dont overlook them until its too late as I did.

ATB

Pref


#2407

OK. I was just checking to see if you were a Director of your own Ltd Co… because if you were there are other neat tricks you can do with a SIPP that save your NIC contributions.

Yep, you would need to take advice/ask others about your little property empire… not something I’ve dealt with.

Right but take note what Pref said. It’s only if you aren’t earning that you are restricted to the £2,880 pa… else you can put in up to £40k pa (and more if you make use of previous unused allowance).

Note also that you’ve got another decade before you’d be able to take any money out of your SIPP… which may or may not suit all.


#2408

Not that I have 40k a year to put away bit if I’m interpreting this correctly, any working person can put 40k a year in @PrefInvestor1?

I will defo open a sipp, it’s just which one to open now and before this year is up.

Do sipp qualify for any government funds on top of the income tax reductions?


#2409

I am a director of that company JW, to be honest it may be more than 25%, not sure by how much, it’s just me n my mum now and we don’t count so much as we just club together. The share ownership has been slowly migrating towards me.

Sorry for prior post @PrefInvestor1, read the responses one at a time and answered you first.
so @J_Westlock, do you think I could take advantage of previous unused years and put the bank in?

What happens at 55, I can take 25% of the pot I understand but what of the 75%?


#2410

Well… assuming you are an employee of your company and receiving a salary… then you could also have the company pay monthly direct into your SIPP.
You can pay up to £40k per tax year (as long as your company has made a profit of at least £40k that year). You then save on corp tax and won’t have to pay employer’s NI or collect income tax via PAYE… because the contributions are an allowable business expense.

If that applies to you ie. your company is making money and also treating you as an employee… then speak to your company accountant about it.


#2411

Company doesn’t make 40k unfortunately but that is very useful info JW. I am an employee.

So is a sipp a sipp and who is best to open one with considering I’d like to pitch stocks and shares to trade?


#2412

OK… well that’s just a max… if it makes a profit of £10k a year then you could get it to pay in to your SIPP up to £10k a year.
Defo look at paying in from your company direct… the tax advantages are amplified over just putting the money into your SIPP as an individual.


#2413

Hi @swamp_rat, Your comments imply that you haven’t quite got the idea of how SIPPs work. Let me try to clarify:-

  1. If you are working then you can contribute up to the amount that you earn each year up to a maximum of £40,000.
  2. If you ARENT working then the maximum you can contribute is £2,880 a year.
  3. Once you have your SIPP opened you can make your contribution direct from your bank account online through your managers website. That amount will be added to your SIPP balance immediately.
  4. Your SIPP manager then send the details off to HMRC and after about 30 days a further amount of money will magically be added to your SIPP corresponding to the tax relief. If you were to deposit £8,000 then for a basic rate tax payer this figure would be £2,000 bring the addition to your SIPP to £10,000. If you put in £40,000 then you would get £10,000 extra bringing the total to £50,000.
  5. Higher and top rate taxpayers can then claim back even more via their tax return. Adding £10,000 to a SIPP could therefore effectively cost a 40% rate taxpayer as little as £6,000 and a 45% rate taxpayer as little as £5,500.

I think Ive got the numbers right, but I would DYOR to check it. For definitive answers you can go to a SIPP tax calculator website like this one:-

There is also a facility to allow contributions to be made in respect of previous years, which you might be able to use to increase your contributions still further.

And of course once the money is in there you have all the same sorts of benefits as an ISA ie no CGT or income tax to worry about on your gains. And if you go with some providers you can have multi-currency accounts AND reclaim withholding tax on overseas dividends in many cases.

Sorry havent got a clue about your idea of including commercial property in a SIPP, you’d have to talk to an expert for that I think.

Also all my comments refer to operating a SIPP as an individual, no idea about limited company operations either. sorry.

Hope that helps…but DO DYOR and talk to some SIPP Providers.

ATB

Pref

PS So there ARE no income tax reductions, as you implied, you dont have to have paid that much tax to get the SIPP relief. It doesnt affect your normal tax return situation as far as I know. Nor are there any “government funds” that can be applied for to benefit your SIPP to my knowledge.


#2414

Telegraph Questor today agrees with you - they are selling their holding from their real money income portfolio.


#2415

That is all wonderful info @PrefInvestor1, I am taking the dogs on a big trip soon so will read the HL link later.

So your outline of the sipp is quite clear to me now. I think the commercial property (the bank held in my own name in my current mindset) can be put in my own sipp and at worst case, I would first have to have the funds in my sipp to buy the bank. This would mean saving the bank value first.

However, I would only need 4/5ths of the value as the government would put 25% (my tax band) onto my deposits (up to a max of £10,000 per annum if I understand correctly.

So theoretically I have the options below:
a) I can add 40k + 10k government addition per year for maximum efficiency until I reach bank value.
b) Can I add 80k/120k this year by adding the last one or two year contributions I wonder and so, receive 20 or 30k additional from the government, meaning I would then have bank value in full after the 2020 contribution. This would be rapid maximum efficiency.
c) I must look into transferring bank in now and using prior years contributions. I wonder would that potentially count as prior years individual max 40k per year contributions meaning 3.2 x £10k government contributions or would it just qualify for 1 x £10k government contribution? (if allowed at all)

All very interesting. The bank needs many thousands spending on it too.

@J_Westlock, I will be making the company pay some amount of cash without doubt on top of the above at least going forward. I really need to move fast so as to enter the sipp before March.


#2416

So I wonder how many previous years £10k’s I can qualify for, these £10k’s could be enough to refurbish the property. although I doubt you can withdraw funds to pay for repairs. That would be too generous.
Right off run the dogs time.


#2417

Sure. Well no rush… you’ve over 4 months yet!
Defo have a chat with your company accountant first if you are going to have company contributions.
No downside as I see it… but your accountant will know better than I.