Cash

markharriers

Morning all just after some input from some like minded people. I am due to receive a large cash sum from one of our house rental sales and my current cash I will transfer to my current stocks and shares isa into my investments leaving me with this cash that i don't really want to put any risk on at the min. All my isa limits will have been taken advantage of for this tax year so im wondering what the most tax efficient way would be to save the cash as a 40% tax payer would be interested in any opinions from you guys.

El_Torro

As a 40% tax payer one tax efficient thing to do is to add enough to your pension to no longer be a 40% tax payer. Pensions aren't really designed to hold large amounts of cash for long periods of time, so you will need to decide if you want to invest the money or not. Investing it means risk.

Alternatively you can leave the money in cash, for example a savings account. Not particularly tax efficient, though at least the money is safe. Premium Bonds are an option, so at least you don't pay tax on any winnings. Premium Bonds are only really suitable for someone who is a 40% tax payer who is already making £500 a year in interest elsewhere.

PixelPound

https://forums.moneysavingexpert.com/discussion/comment/82084433#Comment_82084433

And has £50K to invest.You tend to get less than the headline rate the lower you go.

Exodi

Depending on the status of your pension, I'd consider that.

If your employer offers salary sacrifice, the best way to do it would be to salary sacrifice down to NMW, then use the savings to subsidise your living expenses.

There are limits on how much you can add to a pension (also consider carry forwards), however I'm not sure if what sums we are talking about here.

At the very least I'd increase pension contributions to get out of the 40% tax bracket.

wmb194

https://forums.moneysavingexpert.com/discussion/6677896/cash

Does it need to be instant access or can you lock it away for a while? Capital gains on gilts are tax free* so a popular tactic is to buy low coupon gilts trading below par (£100/£1) and hold them to or close to maturity. You’d use a stockbroker to buy them e.g., AJ Bell, Hargreaves Lansdown and Scottish Widows Share Dealing nee iWeb.

https://giltsyield.com/bond/

*The flip side is that capital losses on gilts cannot be used to offset gains on taxable capital gains.

markharriers

https://forums.moneysavingexpert.com/discussion/comment/82084433#Comment_82084433

Thank You and I appreciate your advice.

markharriers

https://forums.moneysavingexpert.com/discussion/comment/82084471#Comment_82084471

Thank you. I would have to sacrifice about 15k which I dont really want to do as the money is then locked away. Cash sum would be around £100k as I will be transferring my cash isa to stocks this money will become my emergency fund holiday money etc

markharriers

Funny enough I read about these this morning but I don't fully understand them. I'd have around £100k but some of that i would be happy to lock for around 12 months 2 years at a push

aroominyork

You should definitely get an understanding of low coupon gilts where only the coupon/interest is taxed and the capital gain is not. For example, TG27 matures in July 2027 (though you can sell it sooner) and pays the equivalent of 4.3% annually if held to maturity of which only 1.25% is taxable. For TN28 maturing in January 2028 only 0.125% is taxable.

PloughmansLunch

https://forums.moneysavingexpert.com/discussion/comment/82084566#Comment_82084566

This is something I've thought about doing but struggle to get my head around the process - was there an idiot's guide to gilts somewhere on these boards?

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82084444#Comment_82084444

The more PBs you hold the more likely it is that you will have a return close to the average.

If you have a smaller number of PB's you are more likely to get more or less than the average( not just less) .