How to take some interest out of the current tax year?

chris1

Is there such a thing as a "cash-equivalent" UT or bond-type product which increases in value without paying out interest and doesn't have the risk to capital of investing in equities?

DeepSporran

Do you mean that you don't want the interest paid in the current tax year(perhaps this would mean you paying tax on this interest at the higher 40% rate) ?

If so, then there are some accounts like the Kaupthing Edge 36 month fixed rate one, which only pays the interest at the end of the 3 year term. If your income in 3 years time would have decreased, then deferring the interest like this would help you as far as income tax goes.

Or do you want your savings/investment to make you money as a capital increase, rather than as interest (so you are looking at possible capital gains tax rather than certain income tax) ?

That is more difficult if you want very low risk coupled with worthwhile returns.

chris1

DeepSporran wrote: »

Do you mean that you don't want the interest paid in the current tax year(perhaps this would mean you paying tax on this interest at the higher 40% rate) ?

Yes

If so, then there are some accounts like the Kaupthing Edge 36 month fixed rate one, which only pays the interest at the end of the 3 year term. If your income in 3 years time would have decreased, then deferring the interest like this would help you as far as income tax goes.

Thank you, but I didn't want to fix the rate (or be tied to an end date).

Or do you want your savings/investment to make you money as a capital increase, rather than as interest (so you are looking at possible capital gains tax rather than certain income tax) ?

Yes, that would be better. Also it could be cashed in in any future tax year, not fixed in advance.

DeepSporran

Maybe you could look at offshore moneymarket funds - something like this. It appears to allow you to effectively roll over the interest/income for several years and then only get taxed when you withdraw. Not clear whether it's all taxed as income or capital gains though. Pretty poor return though, even before tax (cumulative 23.51% over 5 years I think)

chris1

DeepSporran wrote: »

Maybe you could look at offshore moneymarket funds - something like this. It appears to allow you to effectively roll over the interest/income for several years and then only get taxed when you withdraw. Not clear whether it's all taxed as income or capital gains though. Pretty poor return though, even before tax (cumulative 23.51% over 5 years I think)

I'm not trying to be awkward (not trying to be! ) but I'd be too twitchy with offshore funds (no FCSC protection etc) Any other ideas?

LongTermLurker

DeepSporran wrote: »

Maybe you could look at offshore moneymarket funds - something like this. It appears to allow you to effectively roll over the interest/income for several years and then only get taxed when you withdraw. Not clear whether it's all taxed as income or capital gains though. Pretty poor return though, even before tax (cumulative 23.51% over 5 years I think)

That's the one I was thinking of (ie I remember reading it, not necessarily planning to invest). Here's the front article

http://www.h-l.co.uk/news_and_expert_views/feature_articles/articles/231/rq/article.hl

The JPMorgan Sterling Liquidity Fund normally requires a minimum investment of £30,000. However, we have negotiated special terms for our clients and, through the Vantage Fund Account (it is not available in the Vantage ISA or SIPP), we can offer investments from just £10,000.
It is important to emphasise that the JPMorgan Sterling Liquidity Fund is not a deposit account. It is an offshore money market fund, so investors are not covered by the Financial Services Compensation Scheme. However, with this fund you receive arguably a greater level of reassurance since it is AAA rated. This means that if the rating agencies have done their work correctly, the only type of investment with greater safety would be government bonds (known in the UK as gilts).

So it's quite a high initial investment. I haven't read of anything else, but it would be nice to be able to turn Income into Capital Gain, though you can understand why these are not UK funds.

turbobob

There's the CF Arch Cru Investment Portfolio which aims to beat cash returns and has had a very low volatility so far. But bear in mind it is an investment and is NOT capital guaranteed. Theres a 2% upfront charge through Hargreaves Lansdown, which will be much more if you buy through an agent taking full commission.

runciblespoon

There are also some offshore savings accounts which allow you to defer interest payments - I don't know any in particular, but I think they're more flexible than fixed-rate, fixed-end-date accounts. Moneyfacts has an offshore accounts search - try going through that list. But no FSCS protection.