100k how do I invest to avoid tax

iwblue

I’m looking for ideas about what to do with 100k to protect it from the taxman.

I’ll receive this amount in about 6 months time. July 2024

12 months later I’ll need to access 10k of this annually. July 2025

24 months after that I’ll need to take a lump sum of 35k. This will pay off my mortgage. Jan 2027

I have a PP which is worth approx 68k.

I will be accessing  my works pension of 13k which is why I’ll need the 10k.

After paying the mortgage off I’ll need to continue with the 10k or so for 3 years, then I can access my state pension. May 2030.

Any ideas gratefully received.

amanda1024

You can put £20k per year in an ISA. Depending on which income tax band you’re in, potentially also £50k in premium bonds

NoMore

So your in your 60's ? Are you still working ? How much do you earn ? Could get as much into a pension as possible.

xylophone

You can use your ISA allowance.

You are currently employed so that you might wish to consider making as high a contribution as possible  to a pension. while you still have relevant earnings?

boingy

ISA and Premium Bonds takes care of 70K.
If you have a spouse they could put another 20k into an ISA.

Albermarle

I’m looking for ideas about what to do with 100k to protect it from the taxman.

To use a popular expression on this forum- Do not let the tax tail wag the investment dog.

So what it means is that first you should think about how you can best deploy the £100K to satisfy your financial objectives and fit in with your existing and future finances.  Do you think you will need access to some short term? Are you thinking of boosting your retirement pot? Do you want to just spend some now on a new car etc Do you prefer saving it or investing it ?

When you have decided these things, then you can look at how best to achieve them whilst paying the least tax.

eskbanker

boingy said:

ISA and Premium Bonds takes care of 70K.
If you have a spouse they could put another 20k into an ISA.

....and another £50K in Premium Bonds!

However, I agree with above post about the tax tail wagging the investment dog - it's generally better to seek to maximise net return than to try to minimise tax as such, so, for example, the average luck PB return will be below 4%, and so would be outperformed by a taxable account paying over 5% even if all the interest was taxed (for a basic rate taxpayer).

EthicsGradient

It sounds like you will be retiring at some stage, and then for a few years your income will be the 13k works pension, plus any interest earned on non-ISA accounts. But we don't know exactly when you'll retire, and if the works pension will start at precisely that point (or what your salary is now - basic rate taxpayer?). This may make a lot of difference, since when your salary/pension is just 13k in a tax year, you can get about 5k in interest (coincidentally, roughly what 100k may give you) without paying tax.

So your question may just be "how do I avoid paying tax on it in 24-25, and 25-26 tax years?" And that might be arranged with fixed rate accounts that don't pay out until maturity.

jimjames

With a partner you can get £80k into ISAs by April, that then leaves £20k which could be within your tax free allowance. If you only have £68k pension that gives plenty of scope to boost it with the £20k

aphty

Hi  - in fact I am in a very similar position to the one described  - I hope it's ok to add the details to this thread to clarify my own thoughts on tax and savings interest following what has already been said?

In my case I have just received a settlement sum of a little less than 100k and stopped paid work as of December 31. Before that, I paid higher rate tax. 

Having received the lump sum I used mine and my wife's full annual ISA allowance this tax year to deal with 40k of it. My first thought was that a non ISA savings account created this tax year to deal with the remainder would take me over the £500/year tax-free threshold in interest. But if the maturity date of a non ISA account is after April this year - and as I am now not employed - am I correct in thinking that the interest will not be taxed ? 

My plan is to explore whether we can live off our savings / my wife's salary for the next 3 years before we then access my personal pension pot and later our state pensions in 7 years time. However, I've not really considered things in detail so far for future tax years beginning in April. Our savings are currently housed on the basis of my salary and tax position for this financial year - but I am now no longer be receiving any employment income.

I wondered if there were any suggestions on what might be the key savings interest / tax issues to bear in mind now that I no longer work. Is it as simple as now being able to generate up to the personal allowance amount 12,570 of savings interest each year before tax is payable and so no longer having to consider ISAs on any other basis than if they happen to pay higher interest than non ISA accounts? What other things should I consider?

Any thoughts are most welcome!

jimjames

aphty said:

 But if the maturity date of a non ISA account is after April this year - and as I am now not employed - am I correct in thinking that the interest will not be taxed ? 

Yes if the income is paid in a year when you have no earnings then you'll only be taxed on that interest and any other income so have the personal allowance plus other allowances to use first.