Maxed Cash ISA, next option?

MoneyMan01

I currently have the full amount for the year in a cash ISA, I have the full amount in Premium Bonds and I am now at my limit of £500 a year interest in savings.

What is my option for remaining savings that would be the most tax efficient so that I am not getting taxed on my regular savings above £500?

ColdIron

How close are you to £50,270 earnings? If not too far off you could make a pension contribution to bring you back into basic rate tax and restore your £1,000 Personal Savings Allowance. You'd get some tax relief as well

eskbanker

Best thing will generally be to aim to maximise net return rather than trying to avoid tax as such, but if you're a higher rate taxpayer then options will be fairly limited.  If you already have significant savings, are increased pension contributions an option?

Johnjdc

Low coupon gilts are probably the answer here, unless you want to lock money away (e.g. making pension contributions) or risk it (e.g. S/EIS; VCT).

jimjames

Move it into an ISA in a couple of weeks time? Put some into pension? But do you need so much cash?

boingy

New ISA year starts in about three weeks. That will take care of another 20K.
If you have a spouse you can transfer money to them and they can have ISA and Premium Bonds too (but it will then be their money).
And, yeah, pension is almost always a good idea. You just can't have it back until you are 55/57.

MoneyMan01

Thank you all for your responses and suggestions.

Problem I have, is the retirement age is so far away, and whilst that is the best logical option financially, there is the real world issue of not being able to access that money for such a long time.

If I don't go the pension route, it seems my only options are either get taxed on the interest amount above £500, or look at investment options.

eskbanker

TheDarkKnight93 said:

Thank you all for your responses and suggestions.

Problem I have, is the retirement age is so far away, and whilst that is the best logical option financially, there is the real world issue of not being able to access that money for such a long time.

If I don't go the pension route, it seems my only options are either get taxed on the interest amount above £500, or look at investment options.

But you effectively said you have at least £80K in accessible cash deposit form (£20K ISA, £50K PBs, £10K+ in savings to earn >£500 interest), so how much money do you anticipate wanting/needing to access in the short to medium term?

Your last sentence does sum it up, but it would typically be worth basing financial plans around what the money is for and when it's likely to be needed.

Tonski

Why UK Government Bonds Are a Great Investment Choice (youtube.com)

This is an interesting video on why single UK government bonds (gilts) can be a very tax efficient way to invest if you’ve used up your ISA and SIPP allowance.

MoneyMan01

There are large purchases that would potentially have to be made in the next few years, hence why there is that amount in cash.

Thanks for the info provided. I will do some research and look into Gilts, to store the amount above £500 (interest), until the new tax year.