Where would the Smart Money Go? (What to Do With £32k)

The_Smart_Money · 20 February 2008 at 2:30PM

Hi All,

I'm relatively new to MSE but ive found it to be a great site with intelligent advice and ideas from alot of knowledgeable people - I salute you. (does that sound crass/cheesy?!) :rotfl: hope not, anyway moving swiftly on...............

My question:- I have £32k cash to invest (proceeds from STR (sell-to-rent)). now being a frugal careful soul im looking for any advice in regards to a suitable investment vehicle or storage for my hard earned cash, i.e. bonds, ISA's, savings account etc etc. Any Advice?
One idea I have considered/juggled with is to transfer or 'gift' the whole amount to my current (long term) girlfriend, who is a non taxpaying student. We could then set up a high interest savings account (A&L, NR etc) in her name and store our future nest egg there until the dust settles after the immanent HPC (House Price Crash).
I have considered the implications with this idea and I trust my girlfriend implicitly under any circumstance (some will say foolish no doubt).
I however with my limited knowledge of the law and naivety envisage tax implications with this idea in regards to Capital gains etc, any advice on this would be much appreciated.

Thankyou in antisipation.

SM

lastly in the words of the great Warren Buffet,
"Be fearful when people are being greedy, be greedy when people are fearful"

"Rule 1, Never Loose Money, Rule 2, Never forget Rule 1"

"Risk comes from not knowing what you are doing"

crumpetman · 20 February 2008 at 4:22PM

DON'T GIFT IT TO ANYONE!!

But seriously, the difference in interest isn't that great compared to keeping the money in your own name. Most people would suggest the safe options of putting £3k into a mini cash ISA now and then £3600 after April 1st. Best % last time I checked was 6.25 with A&L.

The remaining £25400 would go into a savings account, best on is paying 6.55% I think.

So, depending on how much tax you pay depends on how much better off you would be gifting the money to a non-tax payer to save for you. It would be something like £300 or more a year for me I would keep it in my own name.

merlinthehappypig · 20 February 2008 at 5:31PM

I'd agree largely with the above.

Whatever your relationship, any money held in someone else's name legally becomes theirs so this is an option that you should avoid if at all possible. As crumpetman says the difference in interest on £25000 or so isn't that great, unless you are a higher rate taxpayer. There are no CGT issues, just the possibility, however remote, that you might have a problem getting it back.

You may trust your g/f implicitly, but relationships can and do go wrong. I'm not casting any doubts on her honesty, but I've seen the strongest relationships degenerate into all out war. Even where parents have trusted their children, things can go horribly wrong.

We currently have all our money in my wife's name as she is a non-taxpayer, but we have 25 years of marriage behind us (and I have all the passwords......). Even so, there would be nothing that I could should she decide to hop off to the Bahamas with the lot.

There are some decent fixed rates around at present which may well pay close to the same as a normal account in your G/F's name.

jamesd · 20 February 2008 at 6:43PM

If you're willing to take some risk of loss you might take a look at the Blackrock Merrill Lynch UK Absolute Alpha fund and see how it has performed during the stock market wobbles. 9% or so in one year without big drops and no tax to pay on interest because it's a capital gain and you get to use your capital gains tax allowance to eliminate the need to pay tax.

Add in some corporate bonds in a stocks and shares ISA and some regular saver account usage and you can do a fair bit better than savings accounts, even in your girlfriend's name. Though giving her the money to put in regular savers isn't a bad idea since you trust her. Note that the interest will be added to the rest of her taxable income and she will have to pay tax if it goes over her personal allowance.

Do note that while I've described some funds that are not likely to suffer greatly there is a chance that they could drop. That's why I mentioned a mixture, so that if one does fall the rest may cover that drop and leave you ahead.

If you want certainty, look at cash ISAs and regular saver accounts and her putting money you give her into them. She can then ask for gross interest as a non-taxpayer unless it takes her taxable income over her personal allowance.

Where would the Smart Money Go? (What to Do With £32k)

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