Large lump sum savings best options.... and associated tax?

Dazed_and_C0nfused

aberamanboy said:

Thanks again.

Not much the wiser after reading that though. Looks like, as a result of having a job, income tax is applicable on all of the savings. The info mentions banding for the rate at which tax is paid. I assume any interest is added to my income received from employment and the applicable percentage applied to it i.e. 40%?

There is no tax whatsoever on savings.

There might be tax to pay on the interest from non ISA accounts.

Most people want to get the best net return although some will seemingly do anything to avoid tax.  Last time I checked putting your cash under the mattress resulted in zero tax.  But also zero interest!

Without knowing your taxable income details it's impossible to know the tax impact of non ISA savings interest.

Dazed_and_C0nfused

incus432 said:

You can earn up to 1000 interest free of tax if you are in the 20% tax band, but only 500 if you pay 40%

Well, potentially £5,999 if you are a basic rate payer.  But for most it will be £1,000.

aberamanboy

Thanks all.

Bit of a minefield.

If I give some of it to family to look after for me, is the transfer subject to capital gains or inheritance tax or any other kind of penalty?

InvesterJones

aberamanboy said:

If I give some of it to family to look after for me

Then no difference, it's still yours.

aberamanboy

InvesterJones said:

aberamanboy said:

If I give some of it to family to look after for me

Then no difference, it's still yours.

Would you mind elaborating a little please?

InvesterJones

aberamanboy said:

InvesterJones said:

aberamanboy said:

If I give some of it to family to look after for me

Then no difference, it's still yours.

Would you mind elaborating a little please?

If someone else is looking after your money for you, it's still your money, so there's no difference in tax treatment of it - you still have your usual 20k ISA allowance, and your usual personal savings allowance for interest, and then taxed per your income bracket.

Dazed_and_C0nfused

InvesterJones said:

aberamanboy said:

InvesterJones said:

aberamanboy said:

If I give some of it to family to look after for me

Then no difference, it's still yours.

Would you mind elaborating a little please?

If someone else is looking after your money for you, it's still your money, so there's no difference in tax treatment of it - you still have your usual 20k ISA allowance, and your usual personal savings allowance for interest, and then taxed per your income bracket.

I don't know exactly what the op means but "give some of it to family to look after for me" sounds like it's no longer his money and the family member could, if they wished, spend it on anything they wanted.  A new car, the 2:30 at Aintree, some earrings or a nice meal out for example.

Tax will be least of the op's problems!

jimjames

aberamanboy said:

Edit: Looks like the limit is £20k?.... I guess my six figure sum is going to get taxed one way or another then (income)?

Your 6 figure sum will not be taxed as income unless it is income - you've not said what generated it. But there is no tax on receiving money, the only tax is potentially on the interest you get from it. Could be a big difference in interest received depending on the amount when a 6 figure sum could be £100,000 or £999,000

jimjames

Dazed_and_C0nfused said:

InvesterJones said:

aberamanboy said:

InvesterJones said:

aberamanboy said:

If I give some of it to family to look after for me

Then no difference, it's still yours.

Would you mind elaborating a little please?

If someone else is looking after your money for you, it's still your money, so there's no difference in tax treatment of it - you still have your usual 20k ISA allowance, and your usual personal savings allowance for interest, and then taxed per your income bracket.

I don't know exactly what the op means but "give some of it to family to look after for me" sounds like it's no longer his money and the family member could, if they wished, spend it on anything they wanted.  

The bit at the end "look after for me" would suggest the OP isn't intending it to not be their money and expects it back. Strange extents people will go to in order to avoid paying tax when receiving interest.

EthicsGradient

Since you imply you're a 40% taxpayer, then Premium Bonds may be worth considering - tax free, and while holding them for short time like this means the return is more variable, the typical return is good for a 40% taxpayer, and you can withdraw the money in just a day or two when you want it for the house. That's a maximum of £50k (I think we're all assuming that you're buying the house on your own - if there's a partner or spouse involved, then you should use their allowances, for everything, too).

As mentioned, you can put up to £20k into an ISA (eg Plum that you mentioned) this tax year, and another £20k, if you haven't yet bought a house, from April 6th 2025.

You have (if a 40% taxpayer) £500 tax free allowance this year. You could use that either with the 3 month Oxbury account you mention, or a monthly paying easy access account like the Monument one on the same MSE page (the high £25k minimum is not a problem for you). 3 months interest on £40k would bring you close to the £500.

After 6th April, what you could do is move some into an account that pays on its anniversary, which would then be in the 2026-27 tax year. When you buy the house, you'd leave the minimum in the account, rather than closing it, to delay the interest payment until April 2026 (so the Monument one doesn't work for that, because of the high minimum). This way, you've use the £500 in each of 2024-25, 25-26 and 26-27. What your interest in 25-26 will be will depend on the actual "six figure" amount, and when you end up buying the house.

If "six figures" means only just over £100k, this might all mean you pay very little income tax on the interest. If it's substantially more, or it takes time to buy, you'll probably pay something.