Higher rate Tax and Inheritance Tax Question

alun4

Sorry, (A forward assumption that the interest on the new total - now with the proceeds of sale - Cap ... £665000 @ {say} 4.5% interest would equal £29925. Her pension income is £23172 so total income will be {say} £53097.(29925 +23172). A very fortunate position to be in but she still wants reassurance there will be enough for the funeral - all we can do is our best!
Regards,
Alun

alun4

jem16, I have looked at the link and will take the information forward. I believe she will think 5 years looking ahead is too long for her and with the High Street and Internet B.Soc Rates at the moment I wonder if now is the time (If we knew when the right time was we'd all be happy!)
Alun

margaretclare

Margaretclare She is from an age and experiences of not so much "can I afford" more of "how can I save to make the future safe"

Sure. I understand that very well. I'm not so far from her in age, and I remember being taught to save, by my poor-as-churchmice family, on my first day at school in September 1940. I was taught to save small amounts, and it was all about 'saving for a rainy day'. It wouldn't be such a bad idea if more of that thinking was to come back, given a recent headline about the amount of indebtedness this country is in!

DH and I are still saving, just because we don't know what our needs may be in years to come, and we do want to be comfortable and have choices. However, if I was in Auntie's situation, left alone with all my needs met and more than enough income and assets, the idea of giving to charity is one that would definitely appeal. Not just with the idea of saving on tax, or on buying 'brownie points' in the next world, but because there are so many charities who would be glad of help. I have my own favourite ideas, which are largely fantasies at present, but I do know that the 'credit crunch' is hitting all the charities.

jem16

alun4 wrote: »

jem16, I have looked at the link and will take the information forward. I believe she will think 5 years looking ahead is too long for her and with the High Street and Internet B.Soc Rates at the moment I wonder if now is the time (If we knew when the right time was we'd all be happy!)
Alun

Any savings account is going to increase her tax, both income and IHT. As a higher rate taxpayer she will struggle to keep up with inflation.

It's a difficult one but I feel seeing an IFA for specialist advice would be best.

sloughflint

jem16 wrote: »

Any savings account is going to increase her tax, both income and IHT. As a higher rate taxpayer she will struggle to keep up with inflation.

It's a difficult one but I feel seeing an IFA for specialist advice would be best.

Not IHT if full allowances are used.

jem16

sloughflint wrote: »

Not IHT if full allowances are used.

If auntie is making almost £30k in interest each year from the £665k it's an awful lot to "get rid" of.

sloughflint

After all the income tax deductions, I thought OP had guesstimated the excess income to be 'got rid of' as approx 14k per annum.

jem16

sloughflint wrote: »

After all the income tax deductions, I thought OP had guesstimated the excess income to be 'got rid of' as approx 14k per annum.

Yes I thought that initially. However later posts seemed to indicate more.

Total was £53097 and living expenses was £26000. That leaves £27097.

sloughflint

Yes I thought that initially. However later posts seemed to indicate more.

Total was £53097 and living expenses was £26000. That leaves £27097.

I don't think this includes income tax though so that would reduce the last figure.

In any event,my understanding on the IHT position is that any surplus in income can be gifted as long as it doesn't affect living standards.
So the capital can remain at £665 000 ( or rather reduce by 3k each year if use capital allowance as well)

I don't know about ways of reducing income tax though which was the other tax that was troubling her.

alun4

There will be extra income in this new tax year now the proceeds of sale of home have entered the equation but the income tax will cut the increasing income back substantially.

My understanding from the advice above is this income can be gifted as an excess of income over expenditure on a regular basis to keep lid on the IHT exposure.

I feel most IFA by instinct will want to advise a bond. I think the purchase then spread prices could make this a poor investment in the short term. At the moment, cash looks one of the best places to be. If we knew when the upturn would be we could invest at the bottom of the cycle but that knowledge is beyond me !