higher rate tax payer with 70k to invest

dodski69

Hi all i am a higher rate tax payer and have 70k to invest. was looking at atom and other saving banks and want to save as much from the tax man what would you suggest

InvesterJones

dodski69 said:

Hi all i am a higher rate tax payer and have 70k to invest. was looking at atom and other saving banks and want to save as much from the tax man what would you suggest

Unless there's some idealogical objection to providing funds to national services, it's probably better to consider best total return after tax, rather than purely minimising the tax deductions - in some cases they're not the same thing.

To help answer your question though, we need to know what you will need from your investments - will you need to access the money, and if so, in what sort of timescale? What's your appetite for risk? What's your situation with respect to pension and ISA contributions?

diystarter7

Hi OP
Based on the little info you have posted, I'd seriously consider P/Bonds if not already maxed out on them

Thanks

dodski69

hi, I won't need access to the money for a year, looking for minimal risk with the best return after tax. I have no ISAs and a standard pension. I am just looking to earn as much net profit as I can with no risk for a year on this sum 

Albermarle

There is no such thing as no risk.
If you put all your money in savings accounts, they will drop in value due to inflation.
However if you need the money within one year, the best paying one year fixed term accounts are here.
Best 1 Year Fixed Rate Bonds | moneyfacts.co.uk

Top one is paying 4.21% . On £70K that would make nearly £3,000 in interest . £500 would be tax free and £2500 taxed at 40%. So net you would have £2000, an effective interest rate of 2.85%

As above £50K in Premium Bonds might not be a bad idea . Average prize rate around 2.6%, with very small possibility of a big win- no tax .

Also £20K into a one year cash ISA. You can get around 3.75% tax free. 

Exodi

Albermarle said:

There is no such thing as no risk.
If you put all your money in savings accounts, they will drop in value due to inflation.
However if you need the money within one year, the best paying one year fixed term accounts are here.
Best 1 Year Fixed Rate Bonds | moneyfacts.co.uk

Top one is paying 4.21% . On £70K that would make nearly £3,000 in interest . £500 would be tax free and £2500 taxed at 40%. So net you would have £2000, an effective interest rate of 2.85%

As above £50K in Premium Bonds might not be a bad idea . Average prize rate around 2.6%, with very small possibility of a big win- no tax .

Alternatively, Virgin Money have a 1 year cash ISA is 4.25%. So on £70k, £2975 interest, which would all be kept.

Even an easy access ISA @ 3% would be worth considering.

Linton

You say you wont need to access the money for a year.  Do you intend to use it all in a years time?

If you have no specific plans to use it in the short term have you considered putting more money into your pension?  This will give a good reduction in tax and potentially better long term returns than cash savings. 

Albermarle

Alternatively, Virgin Money have a 1 year cash ISA is 4.25%. So on £70k, £2975 interest, which would all be kept.

As you can not add more than £20K per tax year to an ISA, this plan is not feasible.

london21

dodski69 said:

hi, I won't need access to the money for a year, looking for minimal risk with the best return after tax. I have no ISAs and a standard pension. I am just looking to earn as much net profit as I can with no risk for a year on this sum 

contributing to your pension.

Barclays offering 4% 1 year fixed ISA.(shop around might be better deals available)

So can put 20k in before April 5th and another £20k after April 5th. 

Alice_Holt

Unless the time frame is really short-term, with a known expense coming up in the next few years,  as a higher rate tax payer it would be silly not to use some of it to increase pension contributions. 

Exodi

Albermarle said:

Alternatively, Virgin Money have a 1 year cash ISA is 4.25%. So on £70k, £2975 interest, which would all be kept.

As you can not add more than £20K per tax year to an ISA, this plan is not feasible.

Sorry yes, brain fart.

£20k in now, £20k in 2 months, perhaps the rest held in premium bonds and/or high rate non tax-wrapped product/pension contributions.