Tax on interest

dunstonh

graham47 wrote: »

Dunstonh,
Purely out of interest, if the person was (say) over 60, what would you suggest were the optimum ways to provide income from a cash lump sum ?

it would depend on risk attitude and how much income is needed. if you assumed a cautious spread then and an active managed investment (i.e. not using a bank adviser or transactional IFA but using an NMA IFA/discretionary fund manager or doing active reviews yourself) then at this moment a spread of cash, fixed interest funds and a dabble into the stockmarket. Property would come into play probably later in the year but not at the moment and maybe an increase into stockmarket at a later rebalance.

Tax wrappers would depend on circumstances but ISA first. Fixed interest funds should be in the ISA to maximise tax advantages (they can still claim back the 10% tax whereas equities and property cannot).

InMyDreams

debbie42 wrote: »

Basically, if you think you are going to be above your tax limit for the year then you shouldn't be filling out an R85 form. I'm not sure why you'd want to, either?

I can think of one reason.

If the interest is taxed at source, then you are not earning interest on that part which has been taken until you get it back which will be up to a year. What's more, if you can also delay paying the income tax that you do actually owe for the year, you can earn interest on all the tax that you are putting off paying.

Given the choice, surely it's better in theory to pay anything as late as possible (assuming no charge to do so). Not sure in practice what sort of a difference this will make (and convenience probably pays a greater role). However if you think you are going to be over the limit, you don't have that choice anyway, as has been said already.