what should I do with my savings?

Jameswpbarrett

Hi my wife and I have been lucky enough to benefit 100K from a will, but am not sure what to do for the best low risk returns. Can I do enough to cover the 1k tax free interest for us both, then the rest in ISAs, or is there another angle?  can i place 20k each year and still receive the tax free wrapper for money invested the previous year? Any ideas would be appreciated

Doctor_Who

Low risk would imply savings accounts. Do you both work? Basic or higher rate tax payers? It can often be beneficial to put more money in accounts in the name of the lower rate tax payer. £20K each in cash ISAs is a start (but only really worth it if you are tax payers). You can each add £20K per year to an ISA, previous years are irrelevant (there are ISA millionaires out there!). Otherwise, fixed rate accounts if you don't need the money within say 1-2 years, but you will have to pay tax if the interest in a tax year exceeds £1000 (for a basic rate tax payer, £500 for a HR tax payer). You each get the £1000/£500 allowance, hence splitting the money helps reduce tax on the interest.

There are lots of alternatives, but they tend to increase risk! Pensions are very tax efficient, but that would depend on your ages etc.

Have a look here for savings accounts:

https://moneyfactscompare.co.uk/savings-accounts/

Newbie_John

You could in theory avoid paying tax on your interests this way:
a) each of you opens ISA with £20k - we have £60k left
b) each of you opens 6% savings account fixed for a year with interest paid annually - put there £10k each - interests will be paid next tax year (£600 for next year of interests)
c) the remaining 2x £20k to the best possible account now - fixed for 1 year at 6% with interests paid monthly £1200 interests in total each but £900 this year and £300 next year.

Next July open another ISAs each with further £20k from c) 
 

Nuanced

Consider if and when you want access to the funds?  Are you stashing it long term? You could each open a fixed term ISA 2x £20,000 per year and find a savings account for the rest in the meantime. That would be very low risk. However, low risk returns will rarely quite keep up with inflation.   Graft and risk may give a better return or you can choose to pay/give up a little to protect the majority of your hoard.

stuhse

Depending on your age and circumstances it could be extremely tax efficient to pay it or some of it into your pension.

Jameswpbarrett

Thank for your assistance everyone.  I appreciate it