Inheritance Money - What to do with it?

joeyp101

Dear All,

Wow, what a fantastic website! Congrats to everyone that makes it work.

To the question-

Myself, and my 2 siblings have just received around £33k each. We would all like to put it somewhere for the next year, either in savings or a bond.

I have had a brief talk with a financial advisor who talked about putting it into a 'trust' account - which I believe means nobody technically owns the money and therefore no tax is liable on the interest earned. I maybe talking a load of crap, but I cant find such a thing, only for children, and if it did exist, how would you put it into a savings account if nobody owned it?!

So... is there no way around paying tax on savings, and if not, what would be the best option for me for a 1 year saving/investment?

Thanks in advance for any replies.

halight

Hi i dont know what to tell you to help.
What ill do is bump this post up so anyone that comes on tonight will see it and one of them may be able to help you
All the best and good luck

joeyp101

Thanks for the support halight

Baldur

joeyp101 wrote: »

I have had a brief talk with a financial advisor

I presume that this 'adviser' was a bank employee? If so, substitute 'salesperson with limited range of tied products available' for the words 'financial adviser'.

...is there no way around paying tax on savings, and if not, what would be the best option for me for a 1 year saving/investment?

There are options, for example up to £3,600 per tax year, per person, can be deposited in a Cash ISA - this gives tax-free interest and a new allowance of £3,600 can be added to the same Cash ISA (or a different one) from 6th April 2009.

National Savings & Investments also offer some tax-free options - http://www.nsandi.com/savingneeds/taxfreeinvestments.jsp

joeyp101

Thanks for the response.

When I say financial advisor, Im not sure of his specific title, but he is independant of any bank and looks after one of my reletives money in investments for a certain fee per year. I will be talking with him tomorrow so I should find out more about so called 'trust' funds.

I know of the basics, like the ISA accounts, but as I have nearly 100k to invest/save, which wont cover much of it. So I take it there really isnt anyway to avoid the tax issue.

What do you think would be the best way to invest it? Bearing in mind its only for 1 year.

Thanks again.

Baldur

joeyp101 wrote: »

What do you think would be the best way to invest it? Bearing in mind its only for 1 year.

Personally, I would forget the word 'invest', as it tends to imply significantly longer term financial planning than a year.

It sounds as though the adviser is an Independent Financial Adviser, from your description.

joeyp101

Baldur wrote: »

Personally, I would forget the word 'invest', as it tends to imply significantly longer term financial planning than a year.

Ok, taken on board.

chardir

If you're concerned about income tax on interest then NS&Is index-linked savings certificates are a good option. You can save 15k in each issue. Since there are 3 of you and two issues available you can save 90k tax-free (and the remainder in ISAs). They have 3-year and 5-year terms but you can cash-in with interest so long as you hold them for more than 12 months.

If you are a higher-rate tax payer then they're very good value, if not then the top savings accounts have comparable returns after tax.

jennifernil

If it is just for a year then I would be looking for the best 1 year fixed rate account......quickly before rates drop.

joeyp101

Thanks for the response guys, much appreciated.

cos69

The costs of putting the money into a trust could be greater than the tax savings - even in a trust tax will have to be paid.

If you each put £33k into a fixed rate bond, the best you will get is 7.05% (Anglo Irish - but you might want to stick with UK companies), then interest is £2327 so if you pay tax at 20%, the tax will be £465

Depending on your income tax might even be at 10% savings rate - so you need to check the costs of the trust and how safe will the money be. So at the end of the year, after tax will the trust give you significantly more than £33k plus £1861 ?