Best saving for £50k

colsten

Dazed_and_confused wrote: »

Taxable salary £100,000 = only income
Tax due is,
£100,000 less Personal Allowance £12,500 = £87,500
£37,500 x 20% = £7,500
£50,000 x 40% = £20,000
Total tax due = £27,500

Or

Taxable salary £100,000 + Taxable interest £500 = Total taxable income (and ANI in this example) £100,500
Tax due is,
£100,500 less Personal Allowance £12,250 = £88,250
Salary £37,500 x 20% = £7,500
Salary £50,250 x 40% = £20,100
Interest £500 x 0% = £0.00
Total tax due = £27,600

Additional tax due £100.

Has similar affect on Married Couple's Allowance and High Income Child Benefit Charge although the effective tax rate isn't 20%.

The additional tax of £100 in your example is caused by the taper reduction of the personal allowance, not by the Personal Savings Allowance. If the Personal Allowance was £12,500 in both cases, tax due in both the above cases would be £27,500.

I grant you that it could be argued that the Personal Savings Allowance isn't £500 for all HR tax payers. But that wasn't the case you made, and the tax would still be less than if the extra £500 income came from salary.

DrHyde

Then investing in Vanguard or elsewhere is too high risk.

There are about 70 funds to choose from within vanguard investor: from cautious Uk bonds to adventurous emerging market stocks.

You can also choose lifestyle or target retirement funds which are very simple and appealing for all risk appetites.

As I say, I also invest with Ratesetter but I'd consider this a less safe / more risky type of investment than a stocks and shares ISA partly for the fact that Ratesetter and such like have never gone through a full blown crisis lifecycle.

Dazed_and_confused

The additional tax of £100 in your example is caused by the taper reduction of the personal allowance, not by the Personal Savings Allowance. If the Personal Allowance was £12,500 in both cases, tax due in both the above cases would be £27,500

You're missing the point.

A higher rate payer is entitled to a Personal Savings Allowance of £500 but the reality is that this is not a tax-free allowance. It is a 0% tax rate.

In my example the supposedly tax-free £500 interest is what has caused the Personal Allowance to be reduced by £250. So having this tax-free income can incur an additional liability of 20% despite the interest itself being taxed at 0%.

The dividend nil rate of tax (aka Dividend Allowance) works in the same way so you could be in a family receiving Child Benefit and have (adjusted net) income of say £50,000 from a job or pension. And savings interest of £500 and £2,000 dividends.

The £500 and £2,000 will both be taxed at 0% but you would incur a High Income Child Benefit Charge resulting in 25% of any Child Benefit received being repayable.