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  • FIRST POST
    • Sallyforth
    • By Sallyforth 9th Aug 18, 5:39 PM
    • 57Posts
    • 237Thanks
    Sallyforth
    Tax on capital?
    • #1
    • 9th Aug 18, 5:39 PM
    Tax on capital? 9th Aug 18 at 5:39 PM
    If I took early retirement now at 57 using some of an inheritance to live on before reaching state pension age would I have to pay tax assuming I took say £10,000 a year? No mortgage and can manage that plus my husbandís pension. I will be investing £50k in premium bonds and know that any winnings there are tax free. Would just love to get out and if the rat race whilst still young enough to enjoy life a bit.
    Many thanks
    Sal
Page 1
    • p00hsticks
    • By p00hsticks 9th Aug 18, 5:52 PM
    • 6,542 Posts
    • 7,094 Thanks
    p00hsticks
    • #2
    • 9th Aug 18, 5:52 PM
    • #2
    • 9th Aug 18, 5:52 PM
    You can take as much as you want - it's classed as savings, not income, so no income tax is due.
    • xylophone
    • By xylophone 9th Aug 18, 5:58 PM
    • 27,654 Posts
    • 16,612 Thanks
    xylophone
    • #3
    • 9th Aug 18, 5:58 PM
    • #3
    • 9th Aug 18, 5:58 PM
    You have an inheritance. You don't pay tax on the capital.

    You intend to save/invest it.

    You will have no income other than the income arising on the savings /investments?

    https://www.skerritts.co.uk/186/news/technical-updates/personal-savings-allowance-and-dividend-allowance

    You have your personal tax allowance/starting rate for savings/savings allowance/dividend allowance.

    Is it likely that your savings/investment income will exceed the above?

    Have you obtained a new state pension statement?

    https://www.gov.uk/check-state-pension

    Do you have an occupational or other pension?
    • dunstonh
    • By dunstonh 9th Aug 18, 6:33 PM
    • 96,058 Posts
    • 63,875 Thanks
    dunstonh
    • #4
    • 9th Aug 18, 6:33 PM
    • #4
    • 9th Aug 18, 6:33 PM
    Think of it as going to the cashpoint machine and drawing out £200. You dont pay tax on that as its not income. That is exactly what you are doing.

    I will be investing £50k in premium bonds and know that any winnings there are tax free.
    Are you letting the tax tail wag the dog? i.e. Premium Bonds are not a great option. Not so bad whilst interest rates are low if you are talking about money that would have been in cash savings anyway. However, if it is medium to long-term money with an income objective, then it may not be suitable and actually riskier than sensible investments.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Sallyforth
    • By Sallyforth 12th Aug 18, 8:40 AM
    • 57 Posts
    • 237 Thanks
    Sallyforth
    • #5
    • 12th Aug 18, 8:40 AM
    • #5
    • 12th Aug 18, 8:40 AM
    Many thanks for your replies. I intend to find an IFA as I honestly am pretty clueless having spent most of my adult life in debt and dealing with it. We cleared all our personal debt and managed to pay off our mortgage around two years ago. Subsequently I was throwing surplus income into my occupational pension (they pay 18% and I pay 10%) but sadly I have not made provision so it!!!8217;s only about £5k and I have another plan worth £20k. I!!!8217;m pence off the full state pension with it being max next April but obviously can!!!8217;t use that for another 10 years.
    So I will soon have c. £450,000 capital with no inheritance tax to pay. It!!!8217;s a scarily large amount to me and I want to invest wisely whilst starting to live a bit and enjoy life more - travel a little etc.
    Another stupid question if I may? When the house sale goes through do I immediately split the cash across different bank accounts so I gain the £85k protection? If so I need to look at opening a couple more instant access savings accounts to put the money in short time I guess.
    Really appreciate any comments.
    Sal
    • Linton
    • By Linton 12th Aug 18, 9:06 AM
    • 10,069 Posts
    • 10,401 Thanks
    Linton
    • #6
    • 12th Aug 18, 9:06 AM
    • #6
    • 12th Aug 18, 9:06 AM
    .....
    Another stupid question if I may? When the house sale goes through do I immediately split the cash across different bank accounts so I gain the £85k protection? If so I need to look at opening a couple more instant access savings accounts to put the money in short time I guess.
    Really appreciate any comments.
    Sal
    Originally posted by Sallyforth

    You are fully protected for 6 months in your bank account for lump sums up to £1M coming from house sales. For longer term storage of cash you could look at NS&I. You can get about 1% interest on up to £1M and it is all guaranteed by the government with no time limit.


    But keeping that amount of money in cash means you are likely to losing out to inflation.
    • xylophone
    • By xylophone 12th Aug 18, 10:15 AM
    • 27,654 Posts
    • 16,612 Thanks
    xylophone
    • #7
    • 12th Aug 18, 10:15 AM
    • #7
    • 12th Aug 18, 10:15 AM
    https://www.nsandi.com/income-bonds

    would do as a holding account while you consider your options.

    Remember that even if you have no relevant earnings, you can still contribute £2880 per annum to a personal pension and receive tax relief of £720.

    It may be worth considering consolidating your existing pensions and continuing to contribute in this way.

    Re looking for an Independent Financial Adviser

    https://www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser



    https://www.fca.org.uk/consumers/what-ask-adviser

    https://www.fca.org.uk/consumers/types-investment-adviser

    https://adviserbook.co.uk/
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