Gift money savings interest

Stanley22

My parents are gifting me around £40,000. I understand this money may be liable for tax if it earns interest. As a 20% tax payer, would the £1000 savings allowance still apply in this instance ? 

Thanks.  

Dazed_and_C0nfused

If the account is in your name then the first £1,000 may well be taxed at 0% (the savings nil rate, aka Personal Savings Allowance).

But some low earning basic rate taxpayers can also benefit from the savings starter rate (up to £4,999 iinterest taxed at 0%).

If your non savings non dividend income i.e. taxable wages, pension etc, is less than £17,570 this could be relevant to you.

You have have to use any available savings starter rate before you can use the savings nil rate.

Jeremy535897

If your question is about whether the source of the funds makes any difference to the taxation of any interest you receive when you invest it, the answer is no.

Stanley22

Thanks for the reply. 

 

I earn 47k a year but with expected bonus and overtime I will be very close to the 40% tax bracket come April, which would also bring the savings allowance down to £500. Am I right I thinking I could put half of the money (£20,000) into an ISA to give myself some wiggle room.  

Stanley22

Jeremy535897 said:

If your question is about whether the source of the funds makes any difference to the taxation of any interest you receive when you invest it, the answer is no.

Thanks for the reply. Yes. I wasn’t sure if gift money would be taxed differently to basic income or if it would fall into the personal savings allowance. 

Dazed_and_C0nfused

Stanley22 said:

Thanks for the reply. 

 

I earn 47k a year but with expected bonus and overtime I will be very close to the 40% tax bracket come April, which would also bring the savings allowance down to £500. Am I right I thinking I could put half of the money (£20,000) into an ISA to give myself some wiggle room.  

If you haven't used your ISA allowance then yes.  Interest from a Cash ISA is tax free.

Albermarle

On a wider front, all savings are losing value due to inflation. If you do not need all of the money long term, you could consider investing it into a Stocks and Shares ISA, or adding it to your pension. The latter will help to reduce any 40% tax liability you have in future.

Stanley22

Albermarle said:

On a wider front, all savings are losing value due to inflation. If you do not need all of the money long term, you could consider investing it into a Stocks and Shares ISA, or adding it to your pension. The latter will help to reduce any 40% tax liability you have in future.

Thanks for the reply. I was planning to increase my workplace pension contributions in the new year which as you say will reduce the 40% tax liability. I will look into the stocks and shares ISA as this is something I had not considered.

Albermarle

Stanley22 said:

Albermarle said:

On a wider front, all savings are losing value due to inflation. If you do not need all of the money long term, you could consider investing it into a Stocks and Shares ISA, or adding it to your pension. The latter will help to reduce any 40% tax liability you have in future.

Thanks for the reply. I was planning to increase my workplace pension contributions in the new year which as you say will reduce the 40% tax liability. I will look into the stocks and shares ISA as this is something I had not considered.

For retirement/late Fifties onwards, pension is nearly always the best bet. S&S ISA is better for money that you do not need for > 10 years ideally, but maybe could be used before the pension starts.
There are these MSE forums which may be of interest.
Savings & investments — MoneySavingExpert Forum
Pensions, annuities & retirement planning — MoneySavingExpert Forum

Stanley22

Albermarle said:

Stanley22 said:

Albermarle said:

On a wider front, all savings are losing value due to inflation. If you do not need all of the money long term, you could consider investing it into a Stocks and Shares ISA, or adding it to your pension. The latter will help to reduce any 40% tax liability you have in future.

Thanks for the reply. I was planning to increase my workplace pension contributions in the new year which as you say will reduce the 40% tax liability. I will look into the stocks and shares ISA as this is something I had not considered.

For retirement/late Fifties onwards, pension is nearly always the best bet. S&S ISA is better for money that you do not need for > 10 years ideally, but maybe could be used before the pension starts.
There are these MSE forums which may be of interest.
Savings & investments — MoneySavingExpert Forum
Pensions, annuities & retirement planning — MoneySavingExpert Forum

Thanks for the links. I’m 35 so we’ll away from retirement age , but I’m trying to get more informed regards investments and pensions etc so I’ll be sure to have a read.