Tax advice

EmilyG2010

Hi all

Somehow I have amassed 150K in savings (inheritance and compensation for an attack). My aim is to get to 200K so that if I lose my job I can live off the interest.

This year I had a payrise. I now earn 40.5K so I think my savings interest should push me into the higher rate band. But it's confusing...

Of the 150K 35 is in a cash isa, 5K is in a stocks and shares ISA (but currently in cash earning no interest), approx 30K is in investment funds (though this I want to cash in asap as the value is dropping a lot.) Most of the rest of the money I locked in to fixed rate deals so that I will not get the interest for a number of years. Only about 20K is accessible and earning me money now.
I worked out that I can stay out of the higher rate band if my ISA income isn't counted. I know I don't get taxed on it but does the interest still count towards my income in a given tax year?

All this is highly confusing! Any advice re my situation would be appreciated.

Also, still on tax: What will I have to pay if I get the money out of the investment funds? The moeny invested is not in an ISA though I could move another 6K in this year.
Does the tax go automatically or do I have to hire an accountant/do a tax form thing?

Thank you so much in advance.

relaxtwotribes

EmilyG2010 wrote: »

Hi all

My aim is to get to 200K so that if I lose my job I can live off the interest.

Do you expect to be extremely parsimonious if you lose your job? If you know where you can receive sufficient interest on £200k to live off it, then it is probably a scam. Stay in the job, increase your aim to £1m and then you might, just might be able to live off the interest.

jem16

EmilyG2010 wrote: »

approx 30K is in investment funds (though this I want to cash in asap as the value is dropping a lot.)

Remember you have to count any dividend payments from these investments.

I worked out that I can stay out of the higher rate band if my ISA income isn't counted. I know I don't get taxed on it but does the interest still count towards my income in a given tax year?

No it is completely discounted.

Also, still on tax: What will I have to pay if I get the money out of the investment funds?

This would be subject to Capital Gains Tax. However you have a CGT allowance of £10,600 so if your gain is less than that there is no tax to pay.

Does the tax go automatically or do I have to hire an accountant/do a tax form thing?

CGT is not automatic. You don't need an accountant though. If you are over the allowance inform HMRC.

Do remember than pension contributions lower your taxable income.

xylophone

You could use your ISA allowance for this tax year - (£11280 of which up to £5640 can be in cash).

EmilyG2010

200K at 5% makes me 10,000 a year. A lot of people live off this in some parts...

Thanks for the rest of the advice.

Can I just clarify: do I pay CGT as a lower rate taxpayer? CGT is money now - money that went in, right? But I think losses can be offset? And I take it we're not just talking 10,600 per any one tax year?

Used up my my cash ISA allowance already tx

jem16

EmilyG2010 wrote: »

200K at 5% makes me 10,000 a year. A lot of people live off this in some parts...

Getting 5% net might be your biggest problem.

You would also have to take into account that your money would be losing value due to inflation if you were to withdraw 5%pa.

Can I just clarify: do I pay CGT as a lower rate taxpayer?

Yes.

CGT is money now - money that went in, right?

Yes.

But I think losses can be offset?

Only against capital gains.

And I take it we're not just talking 10,600 per any one tax year?

If you make a gain of over £10,600 in any one tax year, it's taxable.

http://www.direct.gov.uk/en/moneytaxandbenefits/taxes/beginnersguidetotax/dg_4016313