Large amount of money to invest

RG2015

jj1966 wrote: »

Hi,

I am a bit confused l assumed l am taxed when the bond ends.
So if l were to earn say 4k overall in interest l would be charged 20 % on this total when the bond ends and not each year. Is that right?

Bonds for me seem to have the edge, due to higher rate. I cannot split money as l am single person.

Many bonds pay interest annually and some may also add interest annually even if the interest is not accessible. Therefore you will not always end up with 2,3,4 or 5 years worth of interest hitting your tax account at the same time.

Brynsam

jj1966 wrote: »

I am a bit confused l assumed l am taxed when the bond ends.

At the risk of stating the obvious, find out facts before taking action - the words 'I assumed...' often lead to trouble (not to mention tax bills!).

Lots of info at https://www.moneysavingexpert.com/savings/ or just click the 'banking and saving' tab above.

ValiantSon

jj1966 wrote: »

Hi,

I am a basic tax payer and if l invest in say a 2.25 bond at the end l will make around 5k and have to pay a lot of tax. As limit if 1000k. Therefore unsure if this is the right thing to do.

Any advice would be appreciated

The current top fixed rate savings bond is offering 1.82%. On £55,000 with OakNorth Bank, that works out at £1,001 interest payable, so you would have to pay tax on £1, i.e. 20p (this assumes you have no other interest coming in).

No bank is offering 2.25% that I am aware of on any term rate.

To be getting interest of "around" £5,000 the term would have to take a bond over four years, but it wouldn't all be paid in one year. Each year that you have the bond the interest will be paid for that year, so your tax liability would only be on the interest earned in that year, not the total sum for all four years. The best four year fixed rate is 2.47% with Vanquis Bank.

Anonymous101

Stocks and share's ISA's don't have to be risky. It entirely depends on what you invest in within them.

You could get £40k into an ISA over the end of this tax year and beginning of next and then invest in bonds within the ISA if you didn't want to invest in any type of equities funds.

IMO keeping the money in cash is the worst thing you can do with it if you don't need it within the next few years.

Thrugelmir

jj1966 wrote: »

BTW l dont need to acces the money and would prefer to lock it away, hence to earn a higher rate

What's your longer term aim/goal?

Inflation is currently eroding the value of cash. Simply putting the money on deposit isn't with risk.

chrisgg

It looks like you've considered market risk, and do not want to take this on. But have you considered the impact of inflation risk? The spending power of your lump sum will be eroded over time if you keep it all in cash.

kidmugsy

RG2015 wrote: »

£50k could earn £54 per month in an easy access 1.30% account. So putting in Premium Bonds would "cost" the OP £54 per month.

Oh rubbish: only if you ignore the flow of small prizes that £50k will attract.

ValiantSon

kidmugsy wrote: »

Oh rubbish: only if you ignore the flow of small prizes that £50k will attract.

No, it is not rubbish. While you stand a fair chance of winning some small prizes with £50,000 worth of premium bonds there is no guaranteed return. Furthermore, if you only hold the premium bonds for a month or two then the chance of winning is significantly reduced, as is the chance of matching or exceeding the guaranteed interest from a savings account. In one month you have a 61% chance of winning £50, but the guaranteed interest is higher than this (and nearly 40% chance of not winning). To beat the guaranteed interest you have less than an even chance at 34.7% of winning £75.

Premium bonds are not a panacea.

jimjames

jj1966 wrote: »

BTW l dont need to acces the money and would prefer to lock it away, hence to earn a higher rate

If you want to lock it away then S&S (partly in ISA) would be ideal and you'll get a much higher rate of income.

jj1966 wrote: »

I dont want to take risks and put in Stocks and Shares ISA.

Someone saying they don't want to take risk and use a S&S ISA indicates to me that you don't understand risk. I'd suggest that maybe you need to do some research about risk first so you can make an informed choice.

You certainly don't need to put all the money in one place. The ISA limit is £20k so you can't put it all in an ISA anyway

eskbanker

ValiantSon wrote: »

No, it is not rubbish.

The statement described as 'rubbish' ("putting in Premium Bonds would "cost" the OP £54 per month") is inaccurate and misleading as worded - the probability of £50K of PBs winning nothing in any given month is 13% so therefore that is the probability of PBs "costing" the holder £54 versus using a 1.3% account, if measured solely over a one month period (the percentage would obviously reduce heavily beyond that).

It seems reasonable to me to describe as 'rubbish' a statement that's only true 13% of the time - "putting in Premium Bonds could "cost" the OP £54 per month" or "putting in Premium Bonds would "cost" the OP £54 per month in the statistically unlikely event that the PBs didn't win anything" would clearly both be more truthful and accurate statements....

ValiantSon wrote: »

Premium bonds are not a panacea.

Despite our views on PBs apparently differing, I agree with this!