Tax sheltered accounts maxed out - what now? (UK)

[Uksaver]

As the title says, I have maxed out my SIPP, my ISA and my wife's ISA, mainly because of tapered tax relief reducing the amount I can I can put in my SIPP from £40k to £10k pa.  So I have about £30k pa surplus to find a home for.

Vanguard are now allowing direct retail investment in the UK and I've been looking at them for my first venture into taxable accounts.  The fund range on offer is not as large as in the US.  However, there's a reasonably decent selection.  As I'm keen on global diversification, and a mix of large, medium and small cap for the same reason, I was thinking of the FTSE Global All Cap Index Fund, OCF 0.24%.  Any reason not to go down this route?

[cerat0n1a]

Vanguard's platform isn't particularly cheap compared to other UK providers (i.e you may well be better off buying Vanguard funds through Halifax, Hargreaves Landsdown, Charles Stanley etc. depending on how much you have invested, how often you trade etc etc.) See http://monevator.com/vanguard-direct-uk/ and in particular the comments for more details.

Is your wife also affected by the pension taper? Is it worth upping her pension contributions (you can put in £2880 even if not working)? Your income presumably means you lose the £1000 bank interest and the £2000 dividend income tax free amounts, but again, would it be worth buying the Vanguard funds in your wife's name and taking advantage of those?

Do you have unused pension allowance from previous 3 years that you could use to contribute more than £10k this year?

[Uksaver]

Thanks for the reply.  I'll look at the monevator link.

I have no carry forward left to use for the SIPP; I maxed out on that as well.

I don't lose the £2k dividend allowance so I'm likely to be able to shield dividend income from tax in a taxable account until there's about £50k in there.  I can also shield against CGT by appropriate crystallisation of gains.

The wife is just below the level for 40% tax in a DB scheme with matched AVCs so not much motivation to alter that arrangement.

[Playing with Fire UK]

The reduction from £5k dividend allowance to £2k was paused wasn't it? They took it out of the finance bill after the election was called.

So you'd have £5k for 2017/18 and possibly 2018/19.

You could look into VCTs as well. They aren't right for me but are pretty tax efficient.

I like Halifax for a trading account if you have £30k sitting there that needs to be invested and are happy to use ETFs (they have Vanguard), it's £12.50 per year, plus £12.50 per trade (it can be less). It doesn't work as well if you like to buy or sell frequently. RIT had a decent article explaining what he liked instead of Vanguard. TD Direct comes out well for trading accounts using ETFs.

[Doubleh]

Somebody correct me if I'm wrong but I think your wife could still contribute to a sipp as well as her db scheme and avc as long as the total she contributes doesn't exceed the cap, which of she's a basic rate payer should be 100% of her income

I have an account with Halifax and love it! There's no phone app and the website is straight out of the 90's but there is a good range of funds and while the headline charges say 12 per purchase the "regular" purchase scheme is so flexible - it doesn't need to be regular at all - that you should never need to pay more than £2 per purchase.

I wouldn't usually suggest this, but given how much you're saving bad how much tax you're paying you could consider an EIS or Seed EIS; these are similar to VCT but can have even better tax advantages - in a sEIS every £1 you invest directly reduces you income tax payable by 50p, so in effect Phillip Hammond is doubling your investment. If you follow the rules any gains are free of tax, and there are further reliefs for any losses, and against capital gains from other sources. Of course the reason these reliefs are so good is because you're investing in very early stage and hence risky companies, but it could be an interesting option for a small % of a reasonably sized stache

[Uksaver]

I wouldn't usually suggest this, but given how much you're saving bad how much tax you're paying you could consider an EIS or Seed EIS; these are similar to VCT but can have even better tax advantages - in a sEIS every £1 you invest directly reduces you income tax payable by 50p, so in effect Phillip Hammond is doubling your investment. If you follow the rules any gains are free of tax, and there are further reliefs for any losses, and against capital gains from other sources. Of course the reason these reliefs are so good is because you're investing in very early stage and hence risky companies, but it could be an interesting option for a small % of a reasonably sized stache

I've looked very carefully at EIS, SEIS and VCT type investments but they're just a little outside my risk tolerance.  Also, the need to hold the investments for 5 years doesn't work with my timing.  I will be semi-retiring in a couple of years so my income will drop from about £250k to £100k, at which point, subject to the rules at the time, I'll be able to get £40k pa back into my SIPP again so the excess funds I'm currently looking for a home for need to be quite liquid and not subject to that 5 year restraint.

[Doubleh]

Absolutely fair enough, as I said they are a pretty edge case thing

[cerat0n1a]

The fund you mention seems to be pretty small at $35m (I suppose the £100k min rules it out for a lot of people) whereas the Vanguard VWRL ETF is over $1bn, so possibly buy/sell spread & liquidity might be worth checking out as well as the OCF? I don't understand the implications of the tax rules well enough to know which is better for you.

[Uksaver]

The fund you mention seems to be pretty small at $35m (I suppose the £100k min rules it out for a lot of people) whereas the Vanguard VWRL ETF is over $1bn, so possibly buy/sell spread & liquidity might be worth checking out as well as the OCF? I don't understand the implications of the tax rules well enough to know which is better for you.

The £100k minimum has disappeared now that Vanguard are doing a direct to mainstream public offering in the UK.  The minimum for their UK taxable account is £500 per ad hoc deposit or £100 monthly regular deposit

[cerat0n1a]

Yes, I should probably have said ruled it out rather than rules it out.