inheritance question

Fatbritabroad

To avoid an overly long post I'll split this in 2. First my bit

My grandad passed away in April and ive just had the probate letter through.

He's left me a sum of £45'000 and I'm debating what to do with it.

My situation im 37 and a hrt payer and contribute plenty to my pension so i don't want to put any more in this.

This is a chance for me to get a better balance between pension and. Non pension savings. Ive also fixed my mortgage for ten years at 2.59% last year so don't want to overpay on this

I have 15k in cash savings, 27k in s and s isa with vanguard 100% and another 10k in ifisas in p2 p. So far this year I have contributed 5700 to my isas and contribute 400 a month. I'm going to contribute enough to fill my s and s isa (minus the 400 a month i think I'll leave this to drip feed in.) this leaves me with a couple of queries as i regard my self at very much the beginning of my investment journey so would welcome your education please.

Ive never invested outside of an isa before but with 30k left I'm debating whether to invest at least half of this if not all rather than leave in cash for another 12 months and then bed and isa it in next year.

I guess my question is is there any downside to doing this rather than wait and invest directly in the isa next year? I won't need the money for the foreseeable.

I'm also debating whether to diversify vanguard either with a satellite investment in something like a technology fund or in a smaller companies fund which isn't included in the lifestrategy.

Again my own view at present is I don't want bonds as I'm happy with volatility in return for growth.
Is there anything else you would consider as a satellite? Is it 'acceptable' to simply use a more concentrated active fund like fundsmith as a satellite to try and out perform the core 'boring' tracker holding? Or would you recommend sticking with a tracker until i reach say 100k?

Thanks in advance

Alexland

Sorry for your loss.

Personally I would split the money between a LISA (perhaps doing something active such as Lindsell Train which is discounted on HL), S&S ISA and an unwrapped account which I would gradually feed into the ISAs whenever your income is insufficient to use the full allowance.

I would also consider some capital expenditure such as replacing car, bathroom, kitchen, etc if they need doing and you have been putting them off.

Alex

Fatbritabroad

Many thanks for you condolences. He was 89 and had alzheimers so very much a blessing for both him and my nan (who's much younger around 70 so hopefully will have a life now after being restricted the last 5 years or so). but yes i never expected an inheritance let alone a sum like that

Yes I'll keep some cash as I'm getting rid of my silly lease car next year. I do want to replace my kitchen but my father has kindly agreed to loan me the money for that so I can invest as he knows im very dull with this kind of thing and won't spend it on a porsche

Am i correct that provided i dont get more than 2k in dividends these don't need to be declared for tax purposes on unwrapped investments?

kidmugsy

Fatbritabroad wrote: »

Am i correct that provided i dont get more than 2k in dividends these don't need to be declared for tax purposes on unwrapped investments?

Observe: "Notice how the £2,000 dividend allowance is tax-free, but still takes up £2,000 of your basic rate tax band (£0-£34,500 during 2018-19)."

So it pays no tax itself but it displaces £2k of your 'ard-earned up from 20% tax to 40% tax. So obviously you'll have to report it.

Source: https://www.itcontracting.com/dividend-allowance-cut-2018/

In your shoes I'd concentrate my tax-exposed share dealing in shares that don't pay dividends. For example if you want to hold some US shares you could buy some Berkshire Hathaway - no divis from kind old Uncle Warren.

Fatbritabroad

I'm with Charles stanley direct for my isas and can hold us shares with them. Id rather be a little more diverse than a single (group) of companies but totally take your point on the non dividend payers. Presumably there are other active funds that don't pay dividends. I'm aware even if you take this as an acc fund they still obviously count!

kidmugsy

Fatbritabroad wrote: »

Presumably there are other active funds that don't pay dividends. I'm aware even if you take this as an acc fund they still obviously count!

How about the investment trust "Pantheon International Participations"? They invest in private equity and pay no divi. Worth reading up on?
https://www.moneyobserver.com/our-analysis/fund-profile-pantheon-international-participations

That really would be a diversification from Vanguard.

Fatbritabroad

kidmugsy wrote: »

How about the investment trust "Pantheon International Participations"? They invest in private equity and pay no divi. Worth reading up on?
https://www.moneyobserver.com/our-analysis/fund-profile-pantheon-international-participations

That really would be a diversification from Vanguard.

What an interesting fund. Thank you for that just reading up on it now. I had never heard of this

grey_gym_sock

kidmugsy wrote: »

So it pays no tax itself but it displaces £2k of your 'ard-earned up from 20% tax to 40% tax. So obviously you'll have to report it.

that's not 100% accurate.

dividends count as the top slice of your income; the middle slice is interest; and the lowest slice is everything else (including salary). so having some taxable dividends will not push any more of your salary into higher rate tax.

however, dividends of up to £2k may increase your tax bill in other ways (although the dividends themselves are taxed at 0%). this depends on your circumstances. the dividend counts as part of your total "adjusted income".

e.g. if your adjusted income is between £50-60k, increasing it can increase what you pay in child benefit charge (if you have children).

or if adjusted income is between £100-124k, increasing it can lose some of your personal allowance.

or £150k+, it might be reducing your annual allowance for pension contributions.

it might also affect tax credits. (this is not something i know about in any detail.)

but if none of the above, or any other similar things i've forgotten, apply, then there won't be any tax effect from having dividends up to £2k.

IMHO, picking a specific investment trust, just because it pays no dividends, is ridiculous unless you like it for other reasons. there may be no tax effect at all from having a small amount of dividends, and if there is it will presumably end next tax year when you can bed-and-ISA it.

if you feel the urge to try something a bit different from VLS, then i'd suggest a small-cap tracker, as that's something hardly included in VLS. (technology, for instance, is already included.)

Fatbritabroad

Yes thanks grey gym sock. I was just thinking along the lines of over weighting a particular area re tech. Thanks for the info ref dividends that's as i understood it. My total income is around 86k this year. I contribute around 19%to a pension Inc a 4% employer contribution and have around 150k in this. I'm also due a retention bonus of 40k year after next which will all be put in my pension so a) I'll be leaving some spare allowance under the 3 year rule and b) I'm starting to consider lta (which amazes me i always had a goal of 100k in my pension when i was on a much lower salary a few years ago its amazing how quick its building now)

Fatbritabroad

Edit.u have no children presently but I'll be above the limit for this anyways.slaarh this year about to go up to about 86k

PasturesNew

Sorry for your loss, but I'm going to be blunt here .... your granddad died without having the joy of spending that money - and you are "well loaded". Have you considered using his money to do something fabulous like buying a beach hut at the coast and taking up kayaking... then kick back and relax at weekends either kayaking in the water, or, on stormy days, sitting there with mugs of hot soup in the beach hut watching the scenery unfold?