Savings for zero tax payers

lillo_2

We have given our son a lump sum as a reward for his first degree. He is now a post graduate on a grant and therefore a non taxayer. What is the best way for him to invest the money

dunstonh

Invest or save?

Either way, he should start with an ISA. Just because he is a non-taxpayer now, doesnt mean he wont be in the future.

lillo_2

Thank you , I meant save! I was wondering if he could find an account that paid a higher rate of interest gross but which had tax deducted at source whether he could claim the tax back. As you can tell I am a novice in these things. In the Which magazine that came today it says that if parents give their children a gift that earns more than £100pa the parents are liable for the tax on the whole amount. We have given him £5000 so this would be the case. Does it still count as a gift to a 'child' if he is 22? Would an ISA solve this 'problem'? ( I hope these questions are not too stupid)

Robert_Sterling

Get a high interest rate and fill in an R85.
This need not be in an ISA.
I could make a case for taking a lower rate from a min cash ISA
I could make a case for a higher rate from a non ISA.
Horses for courses.

tom188

Is he going to keep the money and start saving once he starts earning? If yes then the ISA will probably valuable in the long term.

Remember the limit for a cash ISA is 3000 per tax year.

RocketMan

I'm a post grad and I am putting some of my grant towards a regular saver, they are a great way to save money. I use the Lloyds one as it lasts for two years and will pay out when I graduate. If your son has a lump sum he may be able to set up more than one, look on the Regular savers link, then find an account with a good rate of interest and feed the money in over time. These links should prove useful, and make sure he fills out an R85 form for each account!

http://forums.moneysavingexpert.com/showthread.html?t=313538

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1108401263,93536,

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1098730527,15721,

I used an excel spreadsheet to see what sort of return I would get, played around with it a bit since so I hope he finds it useful, here is the link

http://cepheid.81.googlepages.com/home