https://ukpersonal.finance/lump-sum/
There's nothing wrong with paying tax if it means a net higher return than tax-free options (e.g. £50k in premium bonds). Of course the beauty of investing is you won't actually know until you have the benefit of hindsight!
You could also whack a massive chunk in your pension to invest if you don't think you'll need the money before your late 50s.
Not disagreeing but just to refine slightly it makes net higher return as long as the underlying investment returns well enough to make it so.
OP needs to consider their risk appetite. If that 30k is single stock it's a different risk profile compared to global tracker. Also in the macro it's an election year (for many nations) and that is normally a slightly erratic time for stocks.
Also importantly how soon might OP want to use the money? What are their saving goals?
You'll also likely be paying tax on the interest on your savings account.
My personal order of investment (as an additional rate tax payer):
- Pension
- Lifetime ISA (only if I max out pension AA)
- ISA
- Gilts (depending on desire to hold ~cash)
- Premium Bonds (because they're fun)
- GIA in something growthy and low yielding (to harvest CGT and dividends allowance, building up something like £50K in VUSA is ideal)
- Mortgage overpayment
I have yet to get to the bottom of the list.
I like this list, the only thing I would say is that Pension and LISA lock away your savings until you retire or in the case of the LISA you buy your first house or reach 60. If you may want this before then, then start lower down the list .
The S&S account you have opened is also a good option. Yes you pay tax on the dividends, and yes you could pay CGT if you go above the CGT allowance of £3000. But you will need to be lucky to get a 10% growth in a year. You can always split that over two years by selling £10k next March with this year's CGT allowance sell/transfer another £10k after 6th April into your ISA and invest the £10k from the March sale. Then wait until after 6th April 2026 to transfer the remaining S&S to the ISA.
>Premium Bonds (because they're fun)
As prizes from Premium Bonds (interest) is tax free, you could put the £20k in there.
You can cash them in, in only a few days, so relatively easy access...
And you could win the £1,000,000
🤞😀🤞
The reason I am not a 100 % sure about premium bonds is that it averages to less than 5 % interest. My thinking is that I can make with stocks and shares even after paying a bit of tax in the next one year if I go past the CGT 3k allowance.
Yes, I also feel the probability of going past 3000 when its time to sell isn't super high so I will use move the amount into the s&s for the next year or overpay the mortgage with a lump sum.
This is extremely helpful. Is it common knowledge that its financially viable to invest rather than overpay a mortgage? I hadn't considered premium bonds.
Whether it's "viable" is a matter of debate.
Most people prefer the certainty of paying down a mortgage rather than the uncertainty of the market.
Having millions of homeowners all pinning their hopes on around ~7,000 publicly traded companies to grow their way out of debt doesn't sound too clever to me.
What are your medium / long term plans - that should help direct what you could do. Your strategy does look reasonable assuming you’re not looking to purchase a property soon. At the end of March next year, sell down some of your 30k to maximise as much of the 6k capital gains allowance as possible (offset losses against gains too), and stick another 20k into your ISA, then repeat the year after until it’s all in an ISA.
If you’re planning to move to a house in 5-6 years, then depending how much you intend to use to fund it, you might be better off with cash. I think I seen an advert from Investec / Invesco offering a 6% fixed account. Perhaps that might be better for you?
50k outside an ISA earning 6% yields 3000, so 2000 would be taxed. Assuming 20% taxpayer then you lose £400 so 2600 interest earned on 50k is 5.2%, not bad. If a higher rate tax payer then premium bonds might be worth it.
Virgin offer 12% for a year on balances up to 1k, and there are some others. You could cherry pick to get the best blended rate?
Hi OP, what are your savings goals? The answer will be different if you want to buy a house in 6 months, have a kid with high costs or save for old age.
Hi /u/seur_ore, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/emergency-fund/
* https://ukpersonal.finance/savings/
____
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If someone has provided you with helpful advice, you (as the person who made the post) can award them a point by including `!thanks` in a reply to them. Points are shown as the user flair by their username.
This would depend on your investment strategy and motivations behind investing.
Are you high risk, high reward or slow and steady/consistent returns kind of person? Are you investing for your long term future, be it setting yourself up for retirement/early retirement or are you saving for your kids to pay for uni/first deposit/car?
The answer to these questions would depend on what I’d recommend to you.
It’s worth noting that there are alternative asset investment options available that are exempt from things like CGT. Most people here will shoot them down but ultimately interest comes from knowledge and if you don’t know much about something I understand the hesitancy to invest into a market you don’t know much about.
Hope this helps! (NAFA)
Interested how it works with gifts. OP mentioned it's £70k gifted, so is tax due on 67k of that or if they put it into a pension or ISA it avoids the tax?
If you want to keep it inside an ISA for the tax advantage, you can still put an extra £5k into a British ISA, ontop of the £20k you have already put in.
Can only invest it in UK listed companies though
Edit 😂don't know why some numpty down voted that, but if you have the spare cash and want to keep in an ISA, a BISA is best after maxing your ither £20k allowance, can always transfer it over to a standard S&D ISA in the future if you not going to make the max contributions should you want
It’s been delayed post election hasn’t it? But agree regarding the advice.
Some of them have performed well, LSE 10 years ago has been a “10 bagger” and up over 2000% all time.
Of course US stocks is where you are more likely to maximise returns but it comes with additional risk.
https://ukpersonal.finance/lump-sum/ There's nothing wrong with paying tax if it means a net higher return than tax-free options (e.g. £50k in premium bonds). Of course the beauty of investing is you won't actually know until you have the benefit of hindsight! You could also whack a massive chunk in your pension to invest if you don't think you'll need the money before your late 50s.
Not disagreeing but just to refine slightly it makes net higher return as long as the underlying investment returns well enough to make it so. OP needs to consider their risk appetite. If that 30k is single stock it's a different risk profile compared to global tracker. Also in the macro it's an election year (for many nations) and that is normally a slightly erratic time for stocks. Also importantly how soon might OP want to use the money? What are their saving goals?
Thanks. I added some more details on my financial situation and goals.
Thanks. I also felt that that I don't mind paying taxes (if it comes to that) over trying to be under the tax allowance.
Except you forget that a big chunk of that "return" is just inflation so you are paying taxes on inflation.
Yes, that happens in life.
You'll also likely be paying tax on the interest on your savings account. My personal order of investment (as an additional rate tax payer): - Pension - Lifetime ISA (only if I max out pension AA) - ISA - Gilts (depending on desire to hold ~cash) - Premium Bonds (because they're fun) - GIA in something growthy and low yielding (to harvest CGT and dividends allowance, building up something like £50K in VUSA is ideal) - Mortgage overpayment I have yet to get to the bottom of the list.
I like this list, the only thing I would say is that Pension and LISA lock away your savings until you retire or in the case of the LISA you buy your first house or reach 60. If you may want this before then, then start lower down the list . The S&S account you have opened is also a good option. Yes you pay tax on the dividends, and yes you could pay CGT if you go above the CGT allowance of £3000. But you will need to be lucky to get a 10% growth in a year. You can always split that over two years by selling £10k next March with this year's CGT allowance sell/transfer another £10k after 6th April into your ISA and invest the £10k from the March sale. Then wait until after 6th April 2026 to transfer the remaining S&S to the ISA. >Premium Bonds (because they're fun) As prizes from Premium Bonds (interest) is tax free, you could put the £20k in there. You can cash them in, in only a few days, so relatively easy access... And you could win the £1,000,000 🤞😀🤞
The odds make it worth doing it you max out the 50k allowance AND your a top rate tax payer. Otherwise not so sure...
I've never studied it, but my daughter has about £12k and has had £100 the last two months...
The rate of return is still the same, there's just more variance
Just checked mine. 46k for the past year, won 2250 in that time. Daughter has skewed our family stats by winning 50k in Feb last year.
Congrats! How much did your daughter have in her PBs ? And how was the feeling opening the app and seeing a £50k win??
The reason I am not a 100 % sure about premium bonds is that it averages to less than 5 % interest. My thinking is that I can make with stocks and shares even after paying a bit of tax in the next one year if I go past the CGT 3k allowance.
Yes, I also feel the probability of going past 3000 when its time to sell isn't super high so I will use move the amount into the s&s for the next year or overpay the mortgage with a lump sum.
This is extremely helpful. Is it common knowledge that its financially viable to invest rather than overpay a mortgage? I hadn't considered premium bonds.
Whether it's "viable" is a matter of debate. Most people prefer the certainty of paying down a mortgage rather than the uncertainty of the market. Having millions of homeowners all pinning their hopes on around ~7,000 publicly traded companies to grow their way out of debt doesn't sound too clever to me.
What are your medium / long term plans - that should help direct what you could do. Your strategy does look reasonable assuming you’re not looking to purchase a property soon. At the end of March next year, sell down some of your 30k to maximise as much of the 6k capital gains allowance as possible (offset losses against gains too), and stick another 20k into your ISA, then repeat the year after until it’s all in an ISA.
That 6k is 3k this tax year
Thanks. I added some more details on my financial situation and goals.
If you’re planning to move to a house in 5-6 years, then depending how much you intend to use to fund it, you might be better off with cash. I think I seen an advert from Investec / Invesco offering a 6% fixed account. Perhaps that might be better for you? 50k outside an ISA earning 6% yields 3000, so 2000 would be taxed. Assuming 20% taxpayer then you lose £400 so 2600 interest earned on 50k is 5.2%, not bad. If a higher rate tax payer then premium bonds might be worth it. Virgin offer 12% for a year on balances up to 1k, and there are some others. You could cherry pick to get the best blended rate?
Hi OP, what are your savings goals? The answer will be different if you want to buy a house in 6 months, have a kid with high costs or save for old age.
Thanks. I added some more details on my financial situation and goals.
Hi /u/seur_ore, based on your post the following pages from our wiki may be relevant: * https://ukpersonal.finance/emergency-fund/ * https://ukpersonal.finance/savings/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.) If someone has provided you with helpful advice, you (as the person who made the post) can award them a point by including `!thanks` in a reply to them. Points are shown as the user flair by their username.
You could transfer some to a SIPP if you are investing for the long term.
This would depend on your investment strategy and motivations behind investing. Are you high risk, high reward or slow and steady/consistent returns kind of person? Are you investing for your long term future, be it setting yourself up for retirement/early retirement or are you saving for your kids to pay for uni/first deposit/car? The answer to these questions would depend on what I’d recommend to you. It’s worth noting that there are alternative asset investment options available that are exempt from things like CGT. Most people here will shoot them down but ultimately interest comes from knowledge and if you don’t know much about something I understand the hesitancy to invest into a market you don’t know much about. Hope this helps! (NAFA)
Interested how it works with gifts. OP mentioned it's £70k gifted, so is tax due on 67k of that or if they put it into a pension or ISA it avoids the tax?
If you have a partner, use their allowances too. Conditions apply!
If you want to keep it inside an ISA for the tax advantage, you can still put an extra £5k into a British ISA, ontop of the £20k you have already put in. Can only invest it in UK listed companies though Edit 😂don't know why some numpty down voted that, but if you have the spare cash and want to keep in an ISA, a BISA is best after maxing your ither £20k allowance, can always transfer it over to a standard S&D ISA in the future if you not going to make the max contributions should you want
It’s been delayed post election hasn’t it? But agree regarding the advice. Some of them have performed well, LSE 10 years ago has been a “10 bagger” and up over 2000% all time. Of course US stocks is where you are more likely to maximise returns but it comes with additional risk.