Help - 100k inheritance and totally clueless!

MattyNeth

Hi - I've just inherited 100k from a family member, and need some help investing this. I don't want to tie any money up for longer than 6 months, so ideally want instant access to it (thinking of buying a second home as a long term investment).

I have an Icesave account which I'll put £30k. Any other ideas?

dunstonh

thinking of buying a second home as a long term investment

buying an investment home with the money is inefficient. The rental yield is likely to be lower than savings accounts and you will pay income tax on it. Any capital growth is potentially subject to capital gains tax.

Unless you borrow to buy (which does increase the risk) UK property ceases to be attractive at this time.

Reestit_Mutton

MattyNeth wrote: »

Hi - I've just inherited 100k from a family member, and need some help investing this. I don't want to tie any money up for longer than 6 months, so ideally want instant access to it (thinking of buying a second home as a long term investment).

I have an Icesave account which I'll put £30k. Any other ideas?

It's also worth considering how the income from this money will affect your tax banding if your total income are nearing the 40% threshold (approx 38-39K per year).

If this is an issue for you (or you are already a 40% tax payer), you may wish to consider the National Savings Index Linked savings certificates - they pay RPI + a fixed percentage on top per annum, tax free. For a 40% tax payer they are actually quite attractive.

They have 3 year and 5 year products. While I know you won't want to tie your money up that long, it is possible to take your money out after 1 year and still get almost all the interest. However, they are not for people who would need their money within the next 12 months as no interest is paid if you withdraw within the first year.

e.g. the current issue of the 3 year savings certificates pays RPI + 1.15% with the interest added after 1 year of RPI + 0.9%, after 2 years of RPI + 1.1% and after 3 years of RPI +1.4%.

So, after 1 year you can get your money back + RPI + 0.9%.

RPI is currently running at around 3.5% so the total payout would be 4.4% - equivalent to approx 7% for a 40% tax payer - still equivalent to a reasonable 5.5% ish for a basic rate tax payer.

You can invest a maximum of 15K per account per issue (they can sometimes reissue the accounts more than once a year).

HtH
Reestit Mutton

Chrismaths

Get your ISAs sorted first.

StevieJ

Reestit_Mutton wrote: »

It's also worth considering how the income from this money will affect your tax banding if your total income are nearing the 40% threshold (approx 38-39K per year).

If this is an issue for you (or you are already a 40% tax payer), you may wish to consider the National Savings Index Linked savings certificates - they pay RPI + a fixed percentage on top per annum, tax free. For a 40% tax payer they are actually quite attractive.

They have 3 year and 5 year products. While I know you won't want to tie your money up that long, it is possible to take your money out after 1 year and still get almost all the interest. However, they are not for people who would need their money within the next 12 months as no interest is paid if you withdraw within the first year.

e.g. the current issue of the 3 year savings certificates pays RPI + 1.15% with the interest added after 1 year of RPI + 0.9%, after 2 years of RPI + 1.1% and after 3 years of RPI +1.4%.

So, after 1 year you can get your money back + RPI + 0.9%.

RPI is currently running at around 3.5% so the total payout would be 4.4% - equivalent to approx 7% for a 40% tax payer - still equivalent to a reasonable 5.5% ish for a basic rate tax payer.

You can invest a maximum of 15K per account per issue (they can sometimes reissue the accounts more than once a year).

HtH
Reestit Mutton

I think RPI is currently 4.6 (not 3.5).

cheerfulcat

MattyNeth wrote: »

Hi - I've just inherited 100k from a family member, and need some help investing this. I don't want to tie any money up for longer than 6 months, so ideally want instant access to it (thinking of buying a second home as a long term investment).

I have an Icesave account which I'll put £30k. Any other ideas?

Have you paid off the first one yet? If not, why not put ( some of ) the money towards becoming mortgage-free?

jamesd

Savings accounts like Icesave are the way to go for instant access.

For BTL property you should be thinking of deposits on five to ten properties, not buying one outright. The interest on the mortgages is used to reduce the taxable income and the higher number of properties evens out the income when one becomes empty or you have some problem with one property or tenant.

Yields are pretty low right now so unless you use a mortgage to leverage your gain (and risk of loss) you're not going to do as well as you can with other investments. Stocks and shares ISA investing is a good alternative and a good bit of diversification even if you do go with BTL for most of the money.

ED

Reestit Mutton (+ others) - re National Savings and Investments 'Index Linked National Savings Certificates', when was the current issue launched and in which month do you judge the next issue is likely to be launched? Being TAX-free and allowing up to £15,000 to be invested per issue seems attractive.

Chrismaths

but rubbish rates of return do not.

Reestit_Mutton

Chrismaths wrote: »

but rubbish rates of return do not.

How do you work that out?

e.g. if you put money in 3 year Index-Linked savings a year ago, it would have earned you just shy of 6% AFTER TAX by now. equivalent to 7.5% for a basic rate tax payer and 10% for a 40% tax payer.

How is that not attractive?

ED: I don't know when the current issue was released but they say that they can sometimes reissue these certificates a number of times each year.

Reestit Mutton

MattyNeth

Thanks for the replies :-)

We have about 125k on the mortgage, but don't want to use the lot to pay most of it off. Looking to pay off 65k in one hit now, and using salary to smash into whats left.

I'm ISA'd up but ideally want instant access for the remaining 30-40k.

I'm a standard tax payer but right on the boundary of the higher rate bracket