Best 1 Year Return

ChuckyPippy

Hi.

I have around £20K that I need to put aside to pay a tax bill in 2020 (this will be the tax due on the sale of some shares). I would like that £20K to do more than just sit in my bank account for the next 15 months so wondered what my best option would be to invest this money for maximum returns but zero risk (it must not loose money) over that period or more likely a 12 month period?

Thanks
CP

Wobblydeb

Why not simply pay the tax from the income from selling the shares? Or have you already done that, and the bill doesn't need to be settled for some time?

xylophone

https://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html

You might also consider Nationwide Flexdirect current account for part of the cash if you have not had one before - there is also a Regular Saver.

ChuckyPippy

Wobblydeb sorry I wasn't clear, I have just sold shares and my tax liability is £20K but as this will not be due for payment to HMRC until Jan 2020 I would to invest the money somewhere for max returns in that period.

Thanks xylophone I will take a look.

AnotherJoe

Atom bank is easy and 2% for one year. I opened one of those about 2 weeks ago because i already had an account.You can get about 2.15% elsewhere if you look around.

PRAISETHESUN

Investing in funds/stocks isn't appropriate for your timescale, so the best option would be to stick it in an easy access/1-year fixed term savings account of some description. The best rates are around 2% for 1 year, so you will still technically lose money due to inflation - just make sure you pick something with FSCS protection.

The multiple current account/regular saver route might be an option, but its a bit fiddly and time consuming to set up, particularly if you only plan to save the cash for a year.

bowlhead99

PRAISETHESUN wrote: »

Investing in funds/stocks isn't appropriate for your timescale, so the best option would be to stick it in an easy access/1-year fixed term savings account of some description. The best rates are around 2% for 1 year, so you will still technically lose money due to inflation - just make sure you pick something with FSCS protection.

Your post does make sense and is pretty standard good advice.

However, while it's usually sensible to point out that normal fixed/variable rates from easy accounts don't usually keep up with inflation, it's a bit of a red herring in this case, as the tax bill on this asset sale for which the money is being put aside is fixed and will not 'inflate' between now and Jan 2020.

Due to inflation, the pounds being set aside to settle the bill might be able to buy fewer alternative goods and services in Jan 2020 than that amount of money could buy today. However, the cost of settling the tax bill is also falling in value in real terms at the same rate. It costs £20,000 to settle in today's money if you choose to send it to HMRC today - but it will also only cost £20,000 to settle in 2020's money. So you are far better to pay it in 2020's money rather than settle it early, assuming inflation isn't negative. As such, *any* interest earned on the £20k of set-aside cash, is a good thing.

For example if you have fifteen months to pay the £20k bill, depending on your personal tax situation you may be able to earn (say) £400+ net of tax on £19600 after dumping it into a one-year fixed product and a couple of months of variable rate thereafter.

So, you could put £19600 in the savings account and forget about it until maturity, safe in the knowledge that you would be able to clear the £20000 tax bill with the eventual proceeds, regardless of whether inflation happens to be 1% or 10%. The £20k bill that's due on your 2018/9 profits won't inflate unless you forget to pay it by 31/1/2020.