100k to invest

ps2659

I am looking to invest 100k and do not want the investment to generate any income as this will incur tax but I will be looking to draw income from the investment from april 2010. I have used my pep/isa allowances.
Thanks in advance.

wombat42_2

ps2659 wrote: »

I am looking to invest 100k and do not want the investment to generate any income as this will incur tax but I will be looking to draw income from the investment from april 2010. I have used my pep/isa allowances.
Thanks in advance.

How long for as if it was less than 5 years I would be reluctant to invest in the stock market.

ps2659

wombat42 wrote: »

How long for as if it was less than 5 years I would be reluctant to invest in the stock market.

I would prefer to invest in some sort of unit trust /oeic and switch to a fund to produce income in april 2010.

dunstonh

unit trusts make sense unless you are coming up to 65 and income would decrease your age allowance.

ps2659

dunstonh wrote: »

unit trusts make sense unless you are coming up to 65 and income would decrease your age allowance.

Thanks for the reply I will be 58 in april 2010, if I buy unit trusts now would I have to pay tax on any dividend or income or is it possible not to draw from the funds until april 2010.

dunstonh

ps2659 wrote: »

Thanks for the reply I will be 58 in april 2010, if I buy unit trusts now would I have to pay tax on any dividend or income or is it possible not to draw from the funds until april 2010.

The unit trusts would get a tax credit which satisfies the requirement for basic rate taxpayers, unless it takes you into higher rate tax band. From 65, if you earn over £20,900 a year (a figure which increases annually) then you start to lose your age allowance (which increases your tax). There are ways round this but it would include income from pensions, employment, interest, dividends and rental income amongst other things.

Buying the unit trusts now and tweaking them when you want the income isnt a problem.

Primrose

You could invest in a number of good unit trust growth funds, electing to have the dividends reinvested until you are ready to draw income when you retire, when you could switch to equity income funds and draw an income but I think even with the Growth funds you would have to pay tax on dividends reinvested. But as your retirement less than three years away, I would be tempted to keep the equivalent of three years' worth of Maxi ISA allowances (£21K) in a High interest savings account, as 3 years might be too short a term to make a profit on unit trust investments. Then gradually switch your investments under an ISA equity income wrapper every year as your longer term unit trust investments will hopefully have risen in value but every year you will have a circa £9K capital gains allowance against which to offset them. If you don't want to pay any tax on this money until you retire, you may possibly only be able to opt for Premium Bonds and National Savings Certificates up to the maximum holding permitted, but NS Certificates are for 5 years I think, which doesn't fit it with your retirement objective. I think it will be difficult for you to avoid paying tax on some of your £100K before retiring.

dunstonh

think even with the Growth funds you would have to pay tax on dividends reinvested.

Yes.

I would be tempted to keep the equivalent of three years' worth of Maxi ISA allowances (£21K) in a High interest savings account, as 3 years might be too short a term to make a profit on unit trust investments.

most fund supermarkets will allow a "bed and ISA" transaction allowing you to switch a unit trust into an ISA each year.

purch

I am looking to invest 100k and do not want the investment to generate any income as this will incur tax

It will be very hard to shield a £100,000 investment from some form of Tax....unless of course you stick it under your mattress and suffer 3 years of deflation

ps2659

purch wrote: »

It will be very hard to shield a £100,000 investment from some form of Tax....unless of course you stick it under your mattress and suffer 3 years of deflation

I earn just under the 40% tax bracket at the moment and will cease to earn any income from 1st jan 2010 and wish to invest to receive an income after 6th april/new tax year I have money invested in peps isas over the last 8 years or so and have money in different banks earning 6% or above but I would like to move some money from the banks into some kind of investment to grow in value over the 2.5 years and then take an income thereafter.
Thanks for all the replies