Best way to invest £250k

dunstonh

mortgaged buy to lets are high risk. With no risk, they are lower risk but the tax issues can be significant.

Chrismaths

Chrismaths wrote:

So can you tell me by how much the age allowance would be reduced if you received a net dividend of £900?

I'll give you a clue, for every £2 of income, the age allowance is reduced by £1.

No answer yet...

Chrismaths

Come on Ed, I know you're around here somewhere, how much?

EdInvestor

Hello Chrismaths

Sorry for the delay Just been tracking down this thread where the issue was discussed in great detail.

Hope it helps

homeworker

hi on the subject of money and bonds. I read at the begining of the thread that he was going to put £190 k in her name due to not being taxed at the 40%. I have a silly question at what amount can you have, so that you are not taxed at the high tax bracket. I don;t have any income coming in but I do have savings.

jem16

homeworker wrote:

hi on the subject of money and bonds. I read at the begining of the thread that he was going to put £190 k in her name due to not being taxed at the 40%. I have a silly question at what amount can you have, so that you are not taxed at the high tax bracket. I don;t have any income coming in but I do have savings.

You would need to have a total taxable income of £38,335 before you became liable for higher rate tax. This can be income from salary, interest on savings and dividend payments.

Chrismaths

EdInvestrix wrote:

Hello Chrismaths

Sorry for the delay Just been tracking down this thread where the issue was discussed in great detail.

Hope it helps

Avoiding the question, thread not really relevant - it was discussing the effective marginal rate of tax on dividend income near the age allowance - I covered that in my example.

The answer Ed was looking for was that a £900 net dividend reduces the age allowance by £500 - as a £900 net dividend is a £1000 gross dividend. The point I was obviously making, and that Ed was obtusely avoiding, was that saying repeatedly that dividend are "tax-free" to a basic rate taxpayer is simply not true. There might be no further tax to pay for most basic rate taxpayers, but that's a very different beast. It's like saying the interest you receive at the bank is tax-free, because as a basic rate taxpayer you have no further tax to pay. Hogwash.

Better luck next time dearie.

PS.

There was some good stuff in that thread:

dunstonh wrote:

Ignore ed. This is a good example of where someone with a little knowledge can do more harm than good.

MSJW_(chartered_accountant) wrote:

Ed, I think you are not understanding how these bonds work or what they are.

repeat ad nauseam...

EdInvestor

Amazing how defensive the industry people all are about investment bonds, isn't it? Easy to see why when you look under the bonnet though.

Check the charges on the FSA's site.

https://www.fsa.gov.uk/tables

What great little earners they are. No wonder they sell so many.

And the Government does very well too - people think they are avoiding tax when they use them, but they are actually paying more than they would if they didn't!

You couldn't make it up.

Chrismaths

Doesn't apply to me - read my signature, I'm an investment manager not an IFA, I've never sold an investment bond in my life. I've never made a penny out of them, and we never make a charge on a tax wrapper, we simply select the best wrapper for the client, we have no incentive to pick one over another.

However, we wouldn't want that to get in the way of a good troll would we?

pauldb_2

I'm in no position to give complicated financial advice but I'm amazed that no-one has suggested they buy the house (or an equivalent house). I'm guessing £12k rent means a property value of £200-250k. From an academic point of view the lack of capital gains tax on your home and the lack of tax on owner-equivalent rent is the best deal around.

They don't need to worry about rent increases so don't require the preservation of their capital's real value. To meet their need, any investment will need to return 4.8% (12/250) + 2.5% (inflation) after tax. I wouldn't call that medium risk.

The only issue would be if they won't be in the house for long; in this case the costs of buying/moving are relevant. If they could buy at the low end (200k) the remaining £50k in a savings account would give then a decent holiday fund.