Advice on the most tax efficient way to save £100k

Harg8000

We have recently downsized our house in order to release funds to send our children to private school. This has left us with c£100k which I am keen to transfer into a savings account to benefit from the high interest rates out there. I have already transferred £20k into an ISA but are there any other tax efficient ways that I can look at to maximise the return on this money? I am not prepared to risk the money by investing it into stocks and shares etc. Many thanks. 

eskbanker

Harg8000 said:

We have recently downsized our house in order to release funds to send our children to private school. This has left us with c£100k which I am keen to transfer into a savings account to benefit from the high interest rates out there. I have already transferred £20k into an ISA but are there any other tax efficient ways that I can look at to maximise the return on this money? I am not prepared to risk the money by investing it into stocks and shares etc. Many thanks. 

If you say that 'we' have downsized and 'I' have put £20K into an ISA, then presumably the other half of the 'we' can do the same?

If you're at the stage of knowing which school you want to send the children to, it might be worth discussing with them whether any sort of prepayment of fees (at current rates) might be possible on mutually advantageous terms?

EthicsGradient

If you're a higher rate taxpayer, it may be worth considering low-yield gilts, held until maturity. There's income tax on the coupon, but this is low, and the gain is mainly the difference between the buying and maturity price - and that is tax-free, for gilts. See eg Why it’s time to consider adding gilts to your portfolio (investec.com)
Gilt Yields (yieldgimp.com) gives a list of the ones available, and what their net yield is for a 40% taxpayer.
There are also index-linked gilts, which are more complicated, but may be a good idea for something like fees that are likely to vary with inflation.

Harg8000

eskbanker said:

Harg8000 said:

We have recently downsized our house in order to release funds to send our children to private school. This has left us with c£100k which I am keen to transfer into a savings account to benefit from the high interest rates out there. I have already transferred £20k into an ISA but are there any other tax efficient ways that I can look at to maximise the return on this money? I am not prepared to risk the money by investing it into stocks and shares etc. Many thanks. 

If you say that 'we' have downsized and 'I' have put £20K into an ISA, then presumably the other half of the 'we' can do the same?

If you're at the stage of knowing which school you want to send the children to, it might be worth discussing with them whether any sort of prepayment of fees (at current rates) might be possible on mutually advantageous terms?

Yes sorry myself and my wife have both maximised our ISA allowances for the 23/24 financial year. 

I like the idea of pre-paying the fee's so will pick this up with the school. Thank you. 

aroominyork

Harg8000 said:

eskbanker said:

Harg8000 said:

We have recently downsized our house in order to release funds to send our children to private school. This has left us with c£100k which I am keen to transfer into a savings account to benefit from the high interest rates out there. I have already transferred £20k into an ISA but are there any other tax efficient ways that I can look at to maximise the return on this money? I am not prepared to risk the money by investing it into stocks and shares etc. Many thanks. 

If you say that 'we' have downsized and 'I' have put £20K into an ISA, then presumably the other half of the 'we' can do the same?

If you're at the stage of knowing which school you want to send the children to, it might be worth discussing with them whether any sort of prepayment of fees (at current rates) might be possible on mutually advantageous terms?

I like the idea of pre-paying the fee's so will pick this up with the school. Thank you. 

I hope this private school will teach your children the proper use of apostrophes. (Sorry - couldn't resist.)

george4064

Harg8000 said:

eskbanker said:

Harg8000 said:

We have recently downsized our house in order to release funds to send our children to private school. This has left us with c£100k which I am keen to transfer into a savings account to benefit from the high interest rates out there. I have already transferred £20k into an ISA but are there any other tax efficient ways that I can look at to maximise the return on this money? I am not prepared to risk the money by investing it into stocks and shares etc. Many thanks. 

If you say that 'we' have downsized and 'I' have put £20K into an ISA, then presumably the other half of the 'we' can do the same?

If you're at the stage of knowing which school you want to send the children to, it might be worth discussing with them whether any sort of prepayment of fees (at current rates) might be possible on mutually advantageous terms?

Yes sorry myself and my wife have both maximised our ISA allowances for the 23/24 financial year. 

I like the idea of pre-paying the fee's so will pick this up with the school. Thank you. 

EthicsGradient said:

If you're a higher rate taxpayer, it may be worth considering low-yield gilts, held until maturity. There's income tax on the coupon, but this is low, and the gain is mainly the difference between the buying and maturity price - and that is tax-free, for gilts. See eg Why it’s time to consider adding gilts to your portfolio (investec.com)
Gilt Yields (yieldgimp.com) gives a list of the ones available, and what their net yield is for a 40% taxpayer.
There are also index-linked gilts, which are more complicated, but may be a good idea for something like fees that are likely to vary with inflation.

Thanks for sharing the yield gimp website, it looks very useful.

I know that the gilts pay interest twice a year, however do gilts pay a coupon (as well as the principle) at maturity? For example, TN24 presumably has one more interest payment payable on or around 31 Jan 2024?

With a 0.0625p (per 100p) coupon payment and a market price of 98.76, the gross redemption yield of 4.87% seems rather high? Unless I’m missing something.

aroominyork

george4064 said:

Harg8000 said:

eskbanker said:

Harg8000 said:

We have recently downsized our house in order to release funds to send our children to private school. This has left us with c£100k which I am keen to transfer into a savings account to benefit from the high interest rates out there. I have already transferred £20k into an ISA but are there any other tax efficient ways that I can look at to maximise the return on this money? I am not prepared to risk the money by investing it into stocks and shares etc. Many thanks. 

If you say that 'we' have downsized and 'I' have put £20K into an ISA, then presumably the other half of the 'we' can do the same?

If you're at the stage of knowing which school you want to send the children to, it might be worth discussing with them whether any sort of prepayment of fees (at current rates) might be possible on mutually advantageous terms?

Yes sorry myself and my wife have both maximised our ISA allowances for the 23/24 financial year. 

I like the idea of pre-paying the fee's so will pick this up with the school. Thank you. 

EthicsGradient said:

If you're a higher rate taxpayer, it may be worth considering low-yield gilts, held until maturity. There's income tax on the coupon, but this is low, and the gain is mainly the difference between the buying and maturity price - and that is tax-free, for gilts. See eg Why it’s time to consider adding gilts to your portfolio (investec.com)
Gilt Yields (yieldgimp.com) gives a list of the ones available, and what their net yield is for a 40% taxpayer.
There are also index-linked gilts, which are more complicated, but may be a good idea for something like fees that are likely to vary with inflation.

Thanks for sharing the yield gimp website, it looks very useful.

I know that the gilts pay interest twice a year, however do gilts pay a coupon (as well as the principle) at maturity? For example, TN24 presumably has one more interest payment payable on or around 31 Jan 2024?

With a 0.0625p (per 100p) coupon payment and a market price of 98.76, the gross redemption yield of 4.87% seems rather high? Unless I’m missing something.

The yield is annualised. Even if it matured next week it could still show a yield close to 5%. And Yes, it pays a final coupon on maturity as well as the principal (not principle... (please don't help your kids with their English homework)).

Have you used your Personal Savings Allowances of £500/£1000? There are fixed term savings rates which, tax free, are better than low coupon gilt yields.

george4064

aroominyork said:

george4064 said:

Harg8000 said:

eskbanker said:

Harg8000 said:

We have recently downsized our house in order to release funds to send our children to private school. This has left us with c£100k which I am keen to transfer into a savings account to benefit from the high interest rates out there. I have already transferred £20k into an ISA but are there any other tax efficient ways that I can look at to maximise the return on this money? I am not prepared to risk the money by investing it into stocks and shares etc. Many thanks. 

If you say that 'we' have downsized and 'I' have put £20K into an ISA, then presumably the other half of the 'we' can do the same?

If you're at the stage of knowing which school you want to send the children to, it might be worth discussing with them whether any sort of prepayment of fees (at current rates) might be possible on mutually advantageous terms?

Yes sorry myself and my wife have both maximised our ISA allowances for the 23/24 financial year. 

I like the idea of pre-paying the fee's so will pick this up with the school. Thank you. 

EthicsGradient said:

If you're a higher rate taxpayer, it may be worth considering low-yield gilts, held until maturity. There's income tax on the coupon, but this is low, and the gain is mainly the difference between the buying and maturity price - and that is tax-free, for gilts. See eg Why it’s time to consider adding gilts to your portfolio (investec.com)
Gilt Yields (yieldgimp.com) gives a list of the ones available, and what their net yield is for a 40% taxpayer.
There are also index-linked gilts, which are more complicated, but may be a good idea for something like fees that are likely to vary with inflation.

Thanks for sharing the yield gimp website, it looks very useful.

I know that the gilts pay interest twice a year, however do gilts pay a coupon (as well as the principle) at maturity? For example, TN24 presumably has one more interest payment payable on or around 31 Jan 2024?

With a 0.0625p (per 100p) coupon payment and a market price of 98.76, the gross redemption yield of 4.87% seems rather high? Unless I’m missing something.

The yield is annualised. Even if it matured next week it could still show a yield close to 5%. And Yes, it pays a final coupon on maturity as well as the principal (not principle... (please don't help your kids with their English homework)).

Have you used your Personal Savings Allowances of £500/£1000? There are fixed term savings rates which, tax free, are better than low coupon gilt yields.

Thank you for explaining. 

Given there is about 3 months left until maturity, I estimate the (non-annualised) gross redemption return to be c1.25%.

Albermarle

Harg8000 said:

eskbanker said:

Harg8000 said:

We have recently downsized our house in order to release funds to send our children to private school. This has left us with c£100k which I am keen to transfer into a savings account to benefit from the high interest rates out there. I have already transferred £20k into an ISA but are there any other tax efficient ways that I can look at to maximise the return on this money? I am not prepared to risk the money by investing it into stocks and shares etc. Many thanks. 

If you say that 'we' have downsized and 'I' have put £20K into an ISA, then presumably the other half of the 'we' can do the same?

If you're at the stage of knowing which school you want to send the children to, it might be worth discussing with them whether any sort of prepayment of fees (at current rates) might be possible on mutually advantageous terms?

Yes sorry myself and my wife have both maximised our ISA allowances for the 23/24 financial year. 

I like the idea of pre-paying the fee's so will pick this up with the school. Thank you. 

Are you both working/having an income?
Non earners, or low earners can have a lot more savings interest without paying tax.

Hal17

If we get a Labour Government, Private schools would retain some of their tax breaks after party chiefs U-turned on their pledge to strip such schools of charitable status.

However, Labour insists that it will still impose 20 per cent VAT in England on Private schools as one of its first acts in power if it wins the next election.

I would certainly explore the option of pre-payment, many private schools already offer this.

Harg8000

Albermarle said:

Harg8000 said:

eskbanker said:

Harg8000 said:

We have recently downsized our house in order to release funds to send our children to private school. This has left us with c£100k which I am keen to transfer into a savings account to benefit from the high interest rates out there. I have already transferred £20k into an ISA but are there any other tax efficient ways that I can look at to maximise the return on this money? I am not prepared to risk the money by investing it into stocks and shares etc. Many thanks. 

If you say that 'we' have downsized and 'I' have put £20K into an ISA, then presumably the other half of the 'we' can do the same?

If you're at the stage of knowing which school you want to send the children to, it might be worth discussing with them whether any sort of prepayment of fees (at current rates) might be possible on mutually advantageous terms?

Yes sorry myself and my wife have both maximised our ISA allowances for the 23/24 financial year. 

I like the idea of pre-paying the fee's so will pick this up with the school. Thank you. 

Are you both working/having an income?
Non earners, or low earners can have a lot more savings interest without paying tax.

We both work but my wife only works part time and is on the lower tax bracket. She has put the money in a savings account for now until the new tax year commences when the ISA allowance renews.