Tax Free Savings/Investment Options

MoneyMan01

I have maxed my ISA allowance, and have the full amount in Premium Bonds. In the 40% tax bracket.

Have had a look at gilts, but I believe that to be more suitable for lump sums, given the platform fees.

I am aware of additional pension contributions and salary sacrifice.

What other options are there if I want to monthly drip feed money into something, with the focus on not being taxed on interest/returns earned from that?

ColdIron

They are the obvious ones. There are VCTs but for most these are best avoided

You could invest in a non tax sheltered account or plain dealing account for:

• Growth
  Your returns would be from capital gains and you would use periodic sales to make use of the Annual Exempt 'allowance' to avoid CGT (currently £3,000 pa)
• Income
  Your returns would be from dividends. While taxable there is a (not very generous) 'allowance' of £500 but the rate of tax at 33.75% is less than that of income tax. As a HR tax payer this is less useful to you than a BR tax payer but still an option
  

Plenty of investment options available but Investment Trusts are the simplest from a tax PoV

Pensions are probably still by far your best option and perfect for drip feeding. You could take yourself out of the higher rate band altogether

Newbie_John

Why not release £xxk from Premium Bonds, buy gilts and keep topping up premium bond again?

dunstonh

Pension tops the options in terms of tax efficiency.  You say you are aware of it but you haven't said if you are taking advantage of the pension tax wrapper.

InvesterJones

Why the focus on not being taxed? Is it an ideological position, an administration thing, or are you simply trying to get the best returns (and if so, for what)?

MoneyMan01

My logic being that I am already getting taxed 40%. Anything I have left, I would like it to work hard for my future. Having that get further taxed obviously diminishes the amount, which is why I am looking for where to put my money.

Yes, the tax tail is potentially wagging the money dog. For now, I have put it into a GIA until making a decision. Ultimately, it looks as though that is my option, thus having to pay tax on interest earned.

Now I need to find an ETF that is growth focused, rather than Dividends, I suppose.

badger09

MoneyMan01 said:

My logic being that I am already getting taxed 40%. Anything I have left, I would like it to work hard for my future. Having that get further taxed obviously diminishes the amount, which is why I am looking for where to put my money.

Yes, the tax tail is potentially wagging the money dog. For now, I have put it into a GIA until making a decision. Ultimately, it looks as though that is my option, thus having to pay tax on interest earned.

Now I need to find an ETF that is growth focused, rather than Dividends, I suppose.

So you’re prepared to pay CGT?

MoneyMan01

It's become apparent that there is no other choice. Once an ISA and PB's are maxed, you either go the pension contributions route, gilts with a lump sum to make it worthwhile due to the fee's, or start looking at investment in gold, or higher risk items.

Beyond that, it doesn't seem anyone has much choice but to go into tax once the allowances are used.

eskbanker

MoneyMan01 said:

It's become apparent that there is no other choice. Once an ISA and PB's are maxed, you either go the pension contributions route, gilts with a lump sum to make it worthwhile due to the fee's, or start looking at investment in gold, or higher risk items.

Beyond that, it doesn't seem anyone has much choice but to go into tax once the allowances are used.

There's a risk of comparing apples and oranges in that analysis though - it'll generally be best to start from objectives and timescales for the money, which should allow the first cut decision of whether to look towards pensions, standalone investments accessible before pension age, fixed term savings or easy access savings.

Only after that initial triaging is it sensible to look more closely at risks versus returns, etc, and even then, as posted on one of your other threads about this, it's typically best to target maximising net returns rather than trying to avoid tax as such.

MoneyMan01

Absolutely. That’s all information where there is never a right answer really. The right answer is very specific to the individual and their circumstances. 

I’m now looking at whether the net return after tax is better compared to say any potential investment. Again, that isn’t something that you can compare as they are two completely different things, but it comes down to individual circumstances and preferences is the way I’m viewing it. 

eskbanker

MoneyMan01 said:

Absolutely. That’s all information where there is never a right answer really. The right answer is very specific to the individual and their circumstances. 

I’m now looking at whether the net return after tax is better compared to say any potential investment. Again, that isn’t something that you can compare as they are two completely different things, but it comes down to individual circumstances and preferences is the way I’m viewing it. 

The point I was making was that you first decide whether saving or investing suits your circumstances better and then, having picked one over the other, look at returns (and risks) within your chosen option.