£40.000 to save

kammx4

I have just been left £40000 from a uncle and would like to know the best place to put it to earn me money whilst not paying any tax as we have just payed £70000 in inheritance tax. I would like to be able to get some of the money if needed for emergencys

exil

You can put it in a pension fund, and you will be able to top it up with free money from
Gordon Brown at your top rate of income tax. If you earn less than 40k a year, split it up and feed it in in two or more chunks.

That is, you can now put an amount equal to up to 100% of taxable income
and get a tax refund eg

Income 20k
Put 20k into a pension fund
Tax relief = 22% = £4400, this is added to your fund.

You might also get extra tax credit as pension contribs. are taken off your income for tax credit purposes.

Of course - once you put money into a pension, you can't touch it till age 50/55. If you want to keep some available, put it in ISAs, you can put in up to 7k a year. Interest and capital gains will then be tax free.

Or, use it as a deposit on a house (that you are going to live in). If the house gains in value you pay no tax on it.

YorkshireBoy

exil wrote:

Income 20k
Put 20k into a pension fund
Tax relief = 22% = £4400, this is added to your fund.

I think you'll find that the amount of 'free money' from the tax man is a little over 28%.

Using your £20K figure, the free money will be £5,641 - giving a grossed up amount of £25,641 (20,000 x 100 / 78).