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

aberamanboy

jimjames said:

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.

This is exactly what I meant.

aberamanboy

EthicsGradient said:

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.

Thanks very much for the time it must have taken to offer this detailed reply. Very much appreciated.

For the record. Rate of IT inpay is 40% and my premium bonds account is maxed out.

However, you make a good point about the £500 allowance which should cover at least a month or two.

Dazed_and_C0nfused

aberamanboy said:

EthicsGradient said:

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.

Thanks very much for the time it must have taken to offer this detailed reply. Very much appreciated.

For the record. Rate of IT inpay is 40% and my premium bonds account is maxed out.

However, you make a good point about the £500 allowance which should cover at least a month or two.

Don't forget there isn't actually a £500 "allowance".

It's £500 of taxable interest, which would be taxed at 0%

But this can mean you have more HICBC to pay or have a reduced Personal Allowance (if your adjusted net income is high enough, £100k+).