70k in savings sat in a 0.5% account.

Flatulentoldgoat

Just wondering if I can do any better. I have SIPP which has a lump sump in Vanguard shares. Thinking of opening a savings account with them and buying more of that product (as it's done extremely well!)

Any suggestions or pitfalls here (tax point of view?

Easy access would be useful but not essential as I already have a substantial amount in an H2B Isa

grumiofoundation

Vanguard don't offer a savings account so I assume you mean a Stocks and Shares ISA/General investment account.

Gains made within stocks and Shares ISA are tax-free but contributions are limited to 20k per year (across all ISA types). (edited)

Both these accounts would be 'easy access' (few days). With the obvious disclaimer that you can't know exactly how much it will be worth when you come to withdraw as you would with an actual savings account. 

If you are saving for a property (guessed since you have a HTB ISA) have you looked at lifetime ISA? Can also be used for retirement (in which case Stocks and Shares LISA is more suitable as opposed to cash which is more suited for shorter term for house deposit). 
https://www.moneysavingexpert.com/savings/lifetime-isas/

Another point to think about is don't risk your capital on something because it has done well up to now if it is not suitable for your aims/risk tolerance.

colsten

grumiofoundation said:

Gains made within stocks and Shares ISA are tax-free but limited to 20k per year (across all ISA types). 

It's the deposits of new money that are limited to £20K per tax year. All gains on S&S ISA investments, however high the amount, are tax free.

Flatulentoldgoat

I have thought about a LISA, although I'm not sure it would work with me at this point (my H2B Isa is nearly maxed out and I have a low 5 figure sum in a SIPP's account) what do you think?

If I hypothetically put 70k in a general investment account, would my entire capital be taxed or just the interest? Any idea how much the tax would be. I presume it would come off the same pot as my personal tax?

Albermarle

 I have SIPP which has a lump sump in Vanguard shares.

There is no such thing as shares in Vanguard as far as I am aware .

Presume you mean you have some money invested in one of the many Vanguard funds ?

and buying more of that product (as it's done extremely well!)

As have nearly all investments in recent years , not just Vanguard ones, but no guarantee it will continue like that over the next few years. Maybe it will but you have to be fully aware that it might not.

grumiofoundation

colsten said:

grumiofoundation said:

Gains made within stocks and Shares ISA are tax-free but limited to 20k per year (across all ISA types). 

It's the deposits of new money that are limited to £20K per tax year. All gains on S&S ISA investments, however high the amount, are tax free.

Ah yes I missed that (crucial) bit. Edited post.

I blame GWRs bumpy train.

eskbanker

Flatulentoldgoat said:

I have thought about a LISA, although I'm not sure it would work with me at this point (my H2B Isa is nearly maxed out and I have a low 5 figure sum in a SIPP's account) what do you think?

If you're saving to buy your first property then LISA will generally be better than HTB if it's at least a year away, as the property value cap outside London is higher and the amount that can be saved larger too, thereby earning more free money from the government.  Downside is the withdrawal penalty if taking money out other than for a property before 60.

Flatulentoldgoat said:

If I hypothetically put 70k in a general investment account, would my entire capital be taxed or just the interest? Any idea how much the tax would be. I presume it would come off the same pot as my personal tax? 

There are a few investments that pay interest, but in general you'd be earning dividends (the first £2K of which are taxable at 0%), counting towards income tax liability, plus paying capital gains tax on disposal (if above the annual threshold), although taxation of both could be avoided using a S&S ISA (for up to £20K per year).

It sounds like it would be worth spending some time working out what your money will be needed for, as shoving your entire savings pot into more volatile investments isn't a good idea at the best of times but even less so if looking to buy a property in the foreseeable future....

grumiofoundation

Flatulentoldgoat said:

I have thought about a LISA, although I'm not sure it would work with me at this point (my H2B Isa is nearly maxed out and I have a low 5 figure sum in a SIPP's account) what do you think?

If I hypothetically put 70k in a general investment account, would my entire capital be taxed or just the interest? Any idea how much the tax would be. I presume it would come off the same pot as my personal tax?

Capital gains tax is only paid when selling assets. Current rules first £12300 in gains per tax year are tax-free.
https://www.gov.uk/capital-gains-tax
Dividends would be taxable ( but first £2000 are taxed at 0%).
As above some investments may pay interest. 

Realistically if you plan to invest 70k you can potentially have nearly £40k in ISA wrapper by April 2021, another 20k April 2022 and so on each new tax year so unlikely (unless very, very successful) to pay any tax. 

How long are you planning on saving for a deposit? In 2.5 years (3 tax years), by April 2022 you could have contributed £12000 to a lifetime ISA equalling max. bonus from HTB ISA. (LISA also allows house purchase up to £450k everywhere, whereas HTB limited to 250k outside London, which may be helpful?).

If you are planning to buy within 3 years is the money you plan to invest part of your deposit?

Flatulentoldgoat

grumiofoundation said:

Flatulentoldgoat said:

I have thought about a LISA, although I'm not sure it would work with me at this point (my H2B Isa is nearly maxed out and I have a low 5 figure sum in a SIPP's account) what do you think?

If I hypothetically put 70k in a general investment account, would my entire capital be taxed or just the interest? Any idea how much the tax would be. I presume it would come off the same pot as my personal tax?

Capital gains tax is only paid when selling assets. Current rules first £12300 in gains per tax year are tax-free.
https://www.gov.uk/capital-gains-tax
Dividends would be taxable ( but first £2000 are taxed at 0%).
As above some investments may pay interest. 

Realistically if you plan to invest 70k you can potentially have nearly £40k in ISA wrapper by April 2021, another 20k April 2022 and so on each new tax year so unlikely (unless very, very successful) to pay any tax. 

How long are you planning on saving for a deposit? In 2.5 years (3 tax years), by April 2022 you could have contributed £12000 to a lifetime ISA equalling max. bonus from HTB ISA. (LISA also allows house purchase up to £450k everywhere, whereas HTB limited to 250k outside London, which may be helpful?).

If you are planning to buy within 3 years is the money you plan to invest part of your deposit?

Yes, exactly so within a year (been saying that 2 years now but still!) I was planning to spend at least 40-50 K on my deposit + HTB outside London. Hopefully the savings on my mortgage would be like a reversal of a savings account (saving me money on my mortgage as opposed to trying to accrue interest on a savings account which is very low. Does that seem sensible?

Do you think I'd still be better off on a LISA, can I switch over to one?

Oasis1

You could consider putting £50k into Premium Bonds - you'll have a 96% chance of beating the 0.5% interest rate in prizes. Make an informed decision by reading this: https://www.moneysavingexpert.com/savings/premium-bonds/

Oasis1

Also I've maxed out my H2B ISA but I won't be using that for my deposit - I'm simply keeping my £12k in there for the 1% interest rate. I'll be using my LISA for my deposit, and until I do, I'm enjoying the £1000 bonus the government provides each year I add £4k