How to avoid tax on savings interest

pootleflump

We have house sale proceeds in the bank whilst we await new house purchase. We've both exceeded our tax free savings interest allowance - is there any way at all to avoid paying more tax? We've maximised our premium bonds and ISAs. We have a 19 year old daughter - would it be against the law to put money in her savings account? Is there anything else we should do?

wmb194

pootleflump said:

We have house sale proceeds in the bank whilst we await new house purchase. We've both exceeded our tax free savings interest allowance - is there any way at all to avoid paying more tax? We've maximised our premium bonds and ISAs. We have a 19 year old daughter - would it be against the law to put money in her savings account? Is there anything else we should do?

If you're a higher or upper rate taxpayer low coupon gilts trading below par - capital gains are tax free - but the timings might not work if you need the money at short notice. The next ones mature at the end of January and then early June (par is 100p). You buy them via a stockbroker e.g., HL, AJ Bell, Halifax/iWeb.

https://www.yieldgimp.com/

Keep_pedalling

Please don’t get your daughter involved in tax evasion. 

Bigwheels1111

Why not just pay the tax, 60% or 80% is better than nothing.
Interest on 100k is already being wasted as premium bond are not guaranteed to win.
I had to pay 10k CGT when I sold my house four years ago.
Still breaks my heart.
So I feel your pain.

EthicsGradient

Would they be allowed to loan the money to their daughter at 0% interest, so that she gets the benefit of the interest? 

Reaper

EthicsGradient said:

Would they be allowed to loan the money to their daughter at 0% interest, so that she gets the benefit of the interest? 

I don't think it would be breaking any laws but the money would become the daughter's and she would be legally able to refuse to give back the capital and the interest if the family had a falling out. Indeed it would be safer to agree the daughter does not give back the interest to make absolutely sure Settlements Legislation does not apply.

OldScientist

pootleflump said:

We have house sale proceeds in the bank whilst we await new house purchase. We've both exceeded our tax free savings interest allowance - is there any way at all to avoid paying more tax? We've maximised our premium bonds and ISAs. We have a 19 year old daughter - would it be against the law to put money in her savings account? Is there anything else we should do?

Beyond investing in gilts (which has already been suggested), you should probably talk to an accountant or solicitor before doing anything that might constitute tax evasion. Whether that would be cost effective would rather depend on the amount of capital, the length of time before you use it to buy your new house, and therefore the potential savings on tax to be had.

For example, with £100k and 4% interest, the annual interest would be £4000, which means tax of either £800 or £1600. If you are talking about 3 months, then the amount of interest would be roughly £1000 and tax either £200 or £400. If you have £1 million, then multiply these amounts by 10.

So, whether it is worth getting advice then depends on the accountant's (or solicitor's) hourly rate and how much tax they can save you (if any).

Newbie_John

Put it to 0% account, no interest no tax

I think you need to look at it in another way, whatever interests it generates - you still get 60%/80% of interests. 

Cain42

wmb194 said:

pootleflump said:

We have house sale proceeds in the bank whilst we await new house purchase. We've both exceeded our tax free savings interest allowance - is there any way at all to avoid paying more tax? We've maximised our premium bonds and ISAs. We have a 19 year old daughter - would it be against the law to put money in her savings account? Is there anything else we should do?

If you're a higher or upper rate taxpayer low coupon gilts trading below par - capital gains are tax free - but the timings might not work if you need the money at short notice. The next ones mature at the end of January and then early June (par is 100p). You buy them via a stockbroker e.g., HL, AJ Bell, Halifax/iWeb.

Any reason why this discounted yield investment is not more often suggested on these pages, I would assume many people in this forum fall under the 40% and 45% tax on their interest which places this solution as a very advantageous one. 

gravel_2

Cain42 said:

wmb194 said:

pootleflump said:

We have house sale proceeds in the bank whilst we await new house purchase. We've both exceeded our tax free savings interest allowance - is there any way at all to avoid paying more tax? We've maximised our premium bonds and ISAs. We have a 19 year old daughter - would it be against the law to put money in her savings account? Is there anything else we should do?

If you're a higher or upper rate taxpayer low coupon gilts trading below par - capital gains are tax free - but the timings might not work if you need the money at short notice. The next ones mature at the end of January and then early June (par is 100p). You buy them via a stockbroker e.g., HL, AJ Bell, Halifax/iWeb.

Any reason why this discounted yield investment is not more often suggested on these pages, I would assume many people in this forum fall under the 40% and 45% tax on their interest which places this solution as a very advantageous one. 

Gilts are regularly discussed here. Some features make them probably unsuitable for the normal saver. They are an investment product only available through brokers. Not really suitable for regular investment, generally a higher lump sum is seen as the appropriate starting point. There is a trading cost and a tax reporting burden.

InvesterJones

Cain42 said:

Any reason why this discounted yield investment is not more often suggested on these pages, I would assume many people in this forum fall under the 40% and 45% tax on their interest which places this solution as a very advantageous one. 

It is often suggested, however it has to be the right solution - bonds are not savings nor have they historically compared well to equities for long term investments. ISAs and Pension may have even further advantages and the current allowances are very generous so I wouldn't assume many on this forum have already set aside £80k a year and are looking for further tax efficient means.