Investment taxable as capital gain rather than interest, with capital guaranteed

debydiver

Maybe I am looking for the holy grail of investments, I don't know.
I've just moved abroad, sold my home, and I have a small lump sum to invest.
With high interest rates I'm maxed out on tax-free interest so I'm looking for an investment where gains will be taxed as capital gains rather than income.
BUT, I hate to risk my capital so stocks and shares and the like are not for me. 
Now I am overseas I can't invest into an ISA.
Is there any investment where my capital will be guaranteed but gains will be taxed as capital gains and not interest please?

ColdIron

debydiver said:
With high interest rates I'm maxed out on tax-free interest so I'm looking for an investment where gains will be taxed as capital gains rather than income.

Investment gains are treated as capital gains

BUT, I hate to risk my capital so stocks and shares and the like are not for me.

So probably cash/savings rather than investments. Interest is not treated as a capital gain

Is there any investment where my capital will be guaranteed but gains will be taxed as capital gains and not interest please?

You could look at premium bonds, they are not taxed at all but your residency may be a factor, e.g. the US

https://www.nsandi.com/help/join-nsandi/using-nsandi-outside-uk

spider42

If you have become non-resident for UK tax purposes, then the tax treatment where you are resident is likely to be more important than the tax treatment in the UK. Most countries tax their residents on their worldwide income.

If you have existing ISAs, while they will remain tax-free as far as the UK is concerned, they are likely to be taxable in the country where you are resident, as foreign countries won't recognise the tax-free status applying in the UK.

Low coupon gilts would be ideal if you are UK resident, as the capital gain is completely exempt from tax (it doesn't even count as a gain for CGT purposes). However, as above, it may be taxable in the country where you are resident.

debydiver

ColdIron said:

You could look at premium bonds, they are not taxed at all but your residency may be a factor, e.g. the US

https://www.nsandi.com/help/join-nsandi/using-nsandi-outside-uk

Ah yes, thanks. Premium Bonds will fit the bill. Capital guaranteed, and not taxed as interest. Thanks.

debydiver

spider42 said:

If you have become non-resident for UK tax purposes, then the tax treatment where you are resident is likely to be more important than the tax treatment in the UK. Most countries tax their residents on their worldwide income.

I'm OK for that, they don't tax UK interest or gains here so I only have to worry about the UK tax return.

friolento

debydiver said:

spider42 said:

If you have become non-resident for UK tax purposes, then the tax treatment where you are resident is likely to be more important than the tax treatment in the UK. Most countries tax their residents on their worldwide income.

I'm OK for that, they don't tax UK interest or gains here so I only have to worry about the UK tax return.

Which country is this?

debydiver

friolento said:

Which country is this?

I am in the Cayman Islands. No taxes to pay here, but my UK interest is still taxable in the UK. I'll be maxed out on my allowance because of the house proceeds so I'm looking for something that will be taxed as capital gains but where my capital isn't at risk (or not much risk).

masonic

To be clear, premium bond winnings are not taxed as capital gains, they are tax free in the UK.

Another option, mostly but not completely capital gains, are low coupon gilts held to maturity. There will be a small amount of interest, but most of the return would come from a tax exempt capital gain. However, you may struggle to open a investment account to buy these if you are not UK resident.

spider42

debydiver said:

friolento said:

Which country is this?

I am in the Cayman Islands. No taxes to pay here, but my UK interest is still taxable in the UK. I'll be maxed out on my allowance because of the house proceeds so I'm looking for something that will be taxed as capital gains but where my capital isn't at risk (or not much risk).

Are you sure the UK interest will be taxable in the UK? Are you aware of the disregarded income regime? For non-residents, disregarded income (interest, dividends and social security benefits) isn't taxed at more than the amount deducted at source (which is likely to be nil for interest). See https://www.gov.uk/government/publications/non-residents-and-investment-income-hs300-self-assessment-helpsheet/hs300-non-residents-and-investment-income-2023

However, the calculation for disregarded income means you can't claim the Personal Allowance against other income. You do a 'normal' tax calculation (with a PA and the disregarded income still included) and a calculation without a PA and without the disregarded income. You are then taxed on whichever calculation gives the lowest liability.

So provided you don't have any other taxable UK income (UK rent would be the most common type of income which would fall into this category), then there wouldn't be any liability on UK interest, no matter how large it was.

debydiver

spider42 said:

So provided you don't have any other taxable UK income (UK rent would be the most common type of income which would fall into this category), then there wouldn't be any liability on UK interest, no matter how large it was.

There is an occupational pension almost exactly equal to the personal allowance so if we use the disregarded income method, we pay full BR tax on the pension.