Best way to maximise interest income

MartusJK

Hi there, hopefully a fairly simple one I hope you can help with please, my partner has about £30K of savings and wants to keep it easy access, so It seems currently best returns about 4.5 - 5% interest meaning, if my basic maths is right, at least £1350 interest a year and therefore £350 over the tax threshold. So my basic question is to avoid paying tax on that is the simple solution to put £20K of it into a tax free (annual?) ISA and then the interest from the remaining £10K wont breach the £1K tax threshold? Or is this being too simplistic? I know the amounts involved here are relatively small but as a certain supermaket says every bit helps! Many thanks for your consideration.

Linton

Yes, if you buy in an ISA you will avoid any income tax and cgt on any share/fund dividends/interest and capital gains.  You will also avoid any need to keep tax records.  

eskbanker

MartusJK said:

So my basic question is to avoid paying tax on that is the simple solution to put £20K of it into a tax free (annual?) ISA and then the interest from the remaining £10K wont breach the £1K tax threshold? Or is this being too simplistic?

It's simplistic to approach this specifically from the perspective of trying to avoid tax, it's normally more sensible to evaluate how to maximise net return, which sometimes gives a different answer....

jimjames

MartusJK said:

 So my basic question is to avoid paying tax on that is the simple solution to put £20K of it into a tax free (annual?) ISA and then the interest from the remaining £10K wont breach the £1K tax threshold? Or is this being too simplistic?

It's not being simplistic but equally at the moment cash ISAs are paying the best rates so you could get up to 5%. As you say every little helps then that would be the better option anyway

Albermarle

If your partner is not working, or has only a small income, they can earn more than £1000 in interest tax free.

Alexland

It's going to be around 5% interest either way so I'd just put £20k into a Cash ISA now and then the balance on the 6th of April when the new tax year starts. I prefer to have money ISA wrapped as then it's less to think about when considering my own tax situation.

https://www.moneysavingexpert.com/savings/best-cash-isa/

Bigwheels1111

Do you or your partner both earn over £17,570 each.

Do you have an ISA.

5 year fixed rate at 4.61% would give £922.00 interest on 20k.

Paid away annually.

Leaving 10k for isa, as emergency fund.

Select rate order.

Investec Bank plc HL Active Savings - 5 Year Fixed Term Deposit

https://moneyfactscompare.co.uk/savings-accounts/5-year-fixed-rate-bonds/?quick-links-first=false&product-favorites-first=false&sort-order=AER&sort-order-text=Rate

As for an ISA, I use trading212, 4.9% variable.

Easy access.

If either of you earn under £17,570 you can use the amount as tax free interest.

Say you earn £15,000 that would leave you £2,570 for interest and £1,000 PSA on top.

savingsforcarefees

We are having to sell my father’s house to pay for his residential care. Where is the best place to invest the money form the sale of the house to maximise interest?

eskbanker

savingsforcarefees said:

We are having to sell my father’s house to pay for his residential care. Where is the best place to invest the money form the sale of the house to maximise interest?

The above posts and links may help you, but if not then it would be worth starting your own separate thread for your situation.

MartusJK

Sorry for late response and thanks for all the answers. Sorry but another basic question, can you take out an ISA at any time or does it have to be at the start of a tax year i.e. 1st April??

Stubod

..any time...