Got 5k to invest for my 4 year old. Which type of isa would people recommend, cash or stocks and shares ?
Assume this is until they are 18, therefore over that length I'd say a Junior Stocks and Shares ISA. I'd probably pay the £5k in over some months, maybe £1k a month, just to spread the risk a little.
Got 5k to invest for my 4 year old. Which type of isa would people recommend, cash or stocks and shares ?
Assume this is until they are 18, therefore over that length I'd say a Junior Stocks and Shares ISA. I'd probably pay the £5k in over some months, maybe £1k a month, just to spread the risk a little.
Got 5k to invest for my 4 year old. Which type of isa would people recommend, cash or stocks and shares ?
Assume this is until they are 18, therefore over that length I'd say a Junior Stocks and Shares ISA. I'd probably pay the £5k in over some months, maybe £1k a month, just to spread the risk a little.
Yeah until 18, cheers for the suggestion.
If you can, post the £5k do a regular monthly input, even if just £25 or something, will really rack up over 14 years and you'll soon forget you are paying it.
Got 5k to invest for my 4 year old. Which type of isa would people recommend, cash or stocks and shares ?
Assume this is until they are 18, therefore over that length I'd say a Junior Stocks and Shares ISA. I'd probably pay the £5k in over some months, maybe £1k a month, just to spread the risk a little.
Yeah until 18, cheers for the suggestion.
If you can, post the £5k do a regular monthly input, even if just £25 or something, will really rack up over 14 years and you'll soon forget you are paying it.
Yeah that's the plan, he's got another basic one that we've already been paying into, which his other grand parents set up.
Got 5k to invest for my 4 year old. Which type of isa would people recommend, cash or stocks and shares ?
Assume this is until they are 18, therefore over that length I'd say a Junior Stocks and Shares ISA. I'd probably pay the £5k in over some months, maybe £1k a month, just to spread the risk a little.
Yeah until 18, cheers for the suggestion.
If you can, post the £5k do a regular monthly input, even if just £25 or something, will really rack up over 14 years and you'll soon forget you are paying it.
Yeah that's the plan, he's got another basic one that we've already been paying into, which his other grand parents set up.
I'd probably stick to the Junior ISA assuming they don't already have one, although there are some tax friendly one's that some of the friendly societies do also which may be worth a look.
Just one example, not recommending as such but first one in the google search!
Offloaded my Direct Line shares this morning for £1.72 after a bump up of 15% or so on news of a Canadian business unit disposal (at least, I cant see any other news). They may yet recover but the narrative seems to be that there's a huge rebuilding job to do there so I am clearing out at a loss just to get them off my list. Given my habitually awful timing, now's the time for everyone else to buy. Watch them fly past two quid in a week...
Less a question, more a comment/rant. Paying tax on savings interest is a bit of a pisstake isn't it?
Feels like this is going to become a real issue this year with interest rates on accounts now representing something of note. I'd have thought if you do not have to file a self return tax assessment you would act blissfully unaware and you're unlikely to be chased, but if you do have to file it's quite hard to avoid declaring interest gained on savings.
I have recently parked the bus on a property purchase and am fortunate to have a sum of money invested across some ISAs but also some non tax wrapped products. I'm not entirely comfortable being involved in the stock market on current outlook (my 2 ISAs are stocks) as my time horizon is still fairly short run, but the cash interest rate paid on a Fidelity/Vanguard type ISA is less than I would get on something like a Marcus cash account (non ISA, therefore subject to tax) - I know I can transfer these to a cash ISA product but I now have more to deploy than the ISA annual allowance due to the aforementioned property change of heart. I guess the answer is you just have to pay tax on the interest income....there are far too many taxes on top of money already taxed for my liking!!
I imagine I am a bit younger than some of the posters in here, but have never found Premium Bonds particularly sexy however the tax free nature of them is becoming more appealing. No idea how much you actually yield on an annual basis though. I've seen the claim of 4% ish but is this realistic? I'm sure all generations have a general disdain for tax, but for mine it is pretty annoying that the ability to accumulate any wealth at all seems to be punished at every turn. You're incentivized to save for things like a property purchase on such a small amount of money in some accounts either tax free or at a preferred interest rate that it doesn't even make a dent in the house value at present. Home ownership is a hardship for many to reach and the BTL type model is really now dead in the South at least, wealth via housing is not that viable. I can see why many now take the punt on far riskier investments, crypto, even gambling etc.
Have tax rates/thresholds increased in line with general inflation and cost of living increases across the years? I'm talking decades not recently. For example, stamp duty being paid on far higher house prices today represents a huge amount of money, usually the amount that most people would consider a good saving for a house deposit is swallowed by stamp. You can earn objectively good money nowadays but the thresholds on CGT/interest income are pretty measly if you are then taxed. I was reading if you are lucky enough to fall in the 100-125k salary band then you pay an effective 60% tax as you lose the personal allowance.
As this turns more into a rant I have completely lost the train of thought I was going with when I first started writing, but if anyone would like to debate/discuss some of the themes then please tuck in lol
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
Less a question, more a comment/rant. Paying tax on savings interest is a bit of a pisstake isn't it?
Feels like this is going to become a real issue this year with interest rates on accounts now representing something of note. I'd have thought if you do not have to file a self return tax assessment you would act blissfully unaware and you're unlikely to be chased, but if you do have to file it's quite hard to avoid declaring interest gained on savings.
I have recently parked the bus on a property purchase and am fortunate to have a sum of money invested across some ISAs but also some non tax wrapped products. I'm not entirely comfortable being involved in the stock market on current outlook (my 2 ISAs are stocks) as my time horizon is still fairly short run, but the cash interest rate paid on a Fidelity/Vanguard type ISA is less than I would get on something like a Marcus cash account (non ISA, therefore subject to tax) - I know I can transfer these to a cash ISA product but I now have more to deploy than the ISA annual allowance due to the aforementioned property change of heart. I guess the answer is you just have to pay tax on the interest income....there are far too many taxes on top of money already taxed for my liking!!
I imagine I am a bit younger than some of the posters in here, but have never found Premium Bonds particularly sexy however the tax free nature of them is becoming more appealing. No idea how much you actually yield on an annual basis though. I've seen the claim of 4% ish but is this realistic? I'm sure all generations have a general disdain for tax, but for mine it is pretty annoying that the ability to accumulate any wealth at all seems to be punished at every turn. You're incentivized to save for things like a property purchase on such a small amount of money in some accounts either tax free or at a preferred interest rate that it doesn't even make a dent in the house value at present. Home ownership is a hardship for many to reach and the BTL type model is really now dead in the South at least, wealth via housing is not that viable. I can see why many now take the punt on far riskier investments, crypto, even gambling etc.
Have tax rates/thresholds increased in line with general inflation and cost of living increases across the years? I'm talking decades not recently. For example, stamp duty being paid on far higher house prices today represents a huge amount of money, usually the amount that most people would consider a good saving for a house deposit is swallowed by stamp. You can earn objectively good money nowadays but the thresholds on CGT/interest income are pretty measly if you are then taxed. I was reading if you are lucky enough to fall in the 100-125k salary band then you pay an effective 60% tax as you lose the personal allowance.
As this turns more into a rant I have completely lost the train of thought I was going with when I first started writing, but if anyone would like to debate/discuss some of the themes then please tuck in lol
You seem to be in a similar position to where I was 12 months ago. I sold a property & had c£100k to "park" for a year before buying my next property.
I maxed out my ISA (cash) and put the max (£50k) into Premium Bonds. The remainder was put into a 1 year bond. I've just started to "cash-in" these accounts as I'll be moving into my new property soon & just calculating my "net" gains.
Premium Bonds have done ok. Worked out at 4.3% if taken over a whole year. Thats tax free. The ISA only paid 3.7% tax free and the 1 year bond was 4%. Interestingly the tax on the bond has, as you say, to be paid via Self Assessment so will not be "assesed" for tax until Jan 2025. Weird that you can get the interest in one tax year but not pay it until the next......and in my case over 12 months later.
You are correct that in recent times allowances have not been growing - certainly not in line with RPI & many have been frozen. The CGT Allowance has been cut dramatically and as from next tax year (7 months away) it will be just £3k. It is very hard to find way to mitigate tax......but then why would you want to when everyone complains that the NHS is on its knees, schools are falling down & there are many potholes in the roads. And one of the reasons we are in this position is that in 2019 millions of people didn't vote for Corbyn's spending plans.
As a financial adviser of over 30 years standing it never ceases to amaze me that on one hand people moan about the lack of money being spent by succesive Governments & on the other hand that they are being taxed too much.
But there many are different (legal) ways to avoid pay tax / obtain tax reliefs if you know where to go / who to talk to.
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
I take your point, but reveue has to come from somewhere. Why is it fairer to tax people's effort rather than their passive income? There are fairly straightforward ways to mitigate or avoid tax on a base level of savings via ISAs or pension contributions, and if you'd contributed £20k a year to an ISA for the last fifteen years you'd have £300K (plus growth thereon) generating income entirely free of tax. If you have savings way above that, well done - pay the tax. Why should a nurse or teacher etc be taxed at 33% on earnings when someone with a million quid in savings would pay nothing for sitting on their backside making double their money?
You can argue endlessly about the right levels of thresholds and rates, and we might agree the interest income threshold is far loo low, but the basic principle of taxing income on savings I think is a fair one. I say that as a saver with no earned income.
There are unfairnesses in our overly complex mess of a tax system. For example I thought the removal of indexation on capital gains was a complete swindle, but it generally only affects the better off and I dont remember much of an outcry about it at the time, but paying tax on inflation seems unjust. The whole non-dom thing is a nonsense, as is the offshoring of profits by huge corporations.
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
I take your point, but reveue has to come from somewhere. Why is it fairer to tax people's effort rather than their passive income? There are fairly straightforward ways to mitigate or avoid tax on a base level of savings via ISAs or pension contributions, and if you'd contributed £20k a year to an ISA for the last fifteen years you'd have £300K (plus growth thereon) generating income entirely free of tax. If you have savings way above that, well done - pay the tax. Why should a nurse or teacher etc be taxed at 33% on earnings when someone with a million quid in savings would pay nothing for sitting on their backside making double their money?
You can argue endlessly about the right levels of thresholds and rates, and we might agree the interest income threshold is far loo low, but the basic principle of taxing income on savings I think is a fair one. I say that as a saver with no earned income.
There are unfairnesses in our overly complex mess of a tax system. For example I thought the removal of indexation on capital gains was a complete swindle, but it generally only affects the better off and I dont remember much of an outcry about it at the time, but paying tax on inflation seems unjust. The whole non-dom thing is a nonsense, as is the offshoring of profits by huge corporations.
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
I take your point, but reveue has to come from somewhere. Why is it fairer to tax people's effort rather than their passive income? There are fairly straightforward ways to mitigate or avoid tax on a base level of savings via ISAs or pension contributions, and if you'd contributed £20k a year to an ISA for the last fifteen years you'd have £300K (plus growth thereon) generating income entirely free of tax. If you have savings way above that, well done - pay the tax. Why should a nurse or teacher etc be taxed at 33% on earnings when someone with a million quid in savings would pay nothing for sitting on their backside making double their money?
You can argue endlessly about the right levels of thresholds and rates, and we might agree the interest income threshold is far loo low, but the basic principle of taxing income on savings I think is a fair one. I say that as a saver with no earned income.
There are unfairnesses in our overly complex mess of a tax system. For example I thought the removal of indexation on capital gains was a complete swindle, but it generally only affects the better off and I dont remember much of an outcry about it at the time, but paying tax on inflation seems unjust. The whole non-dom thing is a nonsense, as is the offshoring of profits by huge corporations.
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
On your first point it does depend on what is meant by the wealthier. And whether thats wealthy by way of salary or by asset (or both).
Middle and relatively high PAYE earners have been hammered the past 13 years. Whether that's loss of Child Benefit, the 62% you refer to, lowering or freezing where the 40% started, the 45p band and lowering, pension contribution restrictions etc.
I fortunately fall into that band/category (although I have took a step back in Salary/job the past few years), i'd estimate I pay around £10k more tax than I would have 13 years ago, and that's before inflation which would make it much worse.
The question is where would you take the extra tax from, rightly the personal allowance has increased a lot the past 13 years, I'd still like to see it go further to help the lowest paid, but I struggle to see where from a salary perspective they can take much more.
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
I take your point, but reveue has to come from somewhere. Why is it fairer to tax people's effort rather than their passive income? There are fairly straightforward ways to mitigate or avoid tax on a base level of savings via ISAs or pension contributions, and if you'd contributed £20k a year to an ISA for the last fifteen years you'd have £300K (plus growth thereon) generating income entirely free of tax. If you have savings way above that, well done - pay the tax. Why should a nurse or teacher etc be taxed at 33% on earnings when someone with a million quid in savings would pay nothing for sitting on their backside making double their money?
You can argue endlessly about the right levels of thresholds and rates, and we might agree the interest income threshold is far loo low, but the basic principle of taxing income on savings I think is a fair one. I say that as a saver with no earned income.
There are unfairnesses in our overly complex mess of a tax system. For example I thought the removal of indexation on capital gains was a complete swindle, but it generally only affects the better off and I dont remember much of an outcry about it at the time, but paying tax on inflation seems unjust. The whole non-dom thing is a nonsense, as is the offshoring of profits by huge corporations.
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
If you're earning less than 40k/year in london these days you're barely getting by (renting easily eating up ~50% of your paycheck) but 40k is still enough to put you into a higher tax band. Accross the board tax thresholds need to go up, 20k at least should be tax free and would pull those on NMW completely out of the tax system.
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
I take your point, but reveue has to come from somewhere. Why is it fairer to tax people's effort rather than their passive income? There are fairly straightforward ways to mitigate or avoid tax on a base level of savings via ISAs or pension contributions, and if you'd contributed £20k a year to an ISA for the last fifteen years you'd have £300K (plus growth thereon) generating income entirely free of tax. If you have savings way above that, well done - pay the tax. Why should a nurse or teacher etc be taxed at 33% on earnings when someone with a million quid in savings would pay nothing for sitting on their backside making double their money?
You can argue endlessly about the right levels of thresholds and rates, and we might agree the interest income threshold is far loo low, but the basic principle of taxing income on savings I think is a fair one. I say that as a saver with no earned income.
There are unfairnesses in our overly complex mess of a tax system. For example I thought the removal of indexation on capital gains was a complete swindle, but it generally only affects the better off and I dont remember much of an outcry about it at the time, but paying tax on inflation seems unjust. The whole non-dom thing is a nonsense, as is the offshoring of profits by huge corporations.
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
If you're earning less than 40k/year in london these days you're barely getting by (renting easily eating up ~50% of your paycheck) but 40k is still enough to put you into a higher tax band. Accross the board tax thresholds need to go up, 20k at least should be tax free and would pull those on NMW completely out of the tax system.
Not entirely true, 40% starts at 50k earnings (gross), and whilst if you increase all the bands, where do you take the huge amount of lost taxation from?
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
I take your point, but reveue has to come from somewhere. Why is it fairer to tax people's effort rather than their passive income? There are fairly straightforward ways to mitigate or avoid tax on a base level of savings via ISAs or pension contributions, and if you'd contributed £20k a year to an ISA for the last fifteen years you'd have £300K (plus growth thereon) generating income entirely free of tax. If you have savings way above that, well done - pay the tax. Why should a nurse or teacher etc be taxed at 33% on earnings when someone with a million quid in savings would pay nothing for sitting on their backside making double their money?
You can argue endlessly about the right levels of thresholds and rates, and we might agree the interest income threshold is far loo low, but the basic principle of taxing income on savings I think is a fair one. I say that as a saver with no earned income.
There are unfairnesses in our overly complex mess of a tax system. For example I thought the removal of indexation on capital gains was a complete swindle, but it generally only affects the better off and I dont remember much of an outcry about it at the time, but paying tax on inflation seems unjust. The whole non-dom thing is a nonsense, as is the offshoring of profits by huge corporations.
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
If you're earning less than 40k/year in london these days you're barely getting by (renting easily eating up ~50% of your paycheck) but 40k is still enough to put you into a higher tax band. Accross the board tax thresholds need to go up, 20k at least should be tax free and would pull those on NMW completely out of the tax system.
Not entirely true, 40% starts at 50k earnings (gross), and whilst if you increase all the bands, where do you take the huge amount of lost taxation from?
You're right - heat clearly getting to me today.
You need growth, our tax reciepts are breaking records but we're not seeing the economy performing. I guess we need another "big bang" or huge surge of productivity. I have an outside idea of what it could be but i don't want to collect lolz
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
Taxed on wages when you get paid.
Taxed when you spend money, Vat etc.
And if you are lucky enough to have some savings Taxed on interest.
It doesn't seem fair that we get taxed so highly on interest when, as others have said, we were taxed on gross income and savings were after tax paid! Think there should be different rates for those that have retired too. Which brings me onto my biggest gripe - state pension. If you have full NI contributions then you get £203.85 per week - or £5.82 an hour based on a 35 hour week. The minimum wage (that the goverment declare is what you need to live on) is £10.42 an hour or £364.70 a week based on 35 hours. So 78% more...why? UK pensioners get the lowest pension in Europe. Not sure why it's so bad!?
I think tax on savings is a con. You have already paid tax on your earnings before you then save a portion of it so why should you then have to pay further tax on the interest?
Taxed on wages when you get paid.
Taxed when you spend money, Vat etc.
And if you are lucky enough to have some savings Taxed on interest.
If you die Inheritance tax.
One big piss take.
Once again, where would you suggest the a) extra revenue we already need comes from, b) where the additional revenue comes from if we stop taxing certain things (like savings, Inheritance) etc.
It doesn't seem fair that we get taxed so highly on interest when, as others have said, we were taxed on gross income and savings were after tax paid! Think there should be different rates for those that have retired too. Which brings me onto my biggest gripe - state pension. If you have full NI contributions then you get £203.85 per week - or £5.82 an hour based on a 35 hour week. The minimum wage (that the goverment declare is what you need to live on) is £10.42 an hour or £364.70 a week based on 35 hours. So 78% more...why? UK pensioners get the lowest pension in Europe. Not sure why it's so bad!?
Don't forget depending on your tax position you either get £1k, £500 or for us lucky one's £0 allowance on interest before it is taxed. There's also no reason for people to not use their £20k annual ISA allowance, for 99% of the population £20k per annum is less than what they would save per tax year. The problem has been low interest rates, therefore people have not been using their ISA tax allowance, had people done so then, again for 99% of people, tax on savings interest would not come into the picture.
Our state pension is somewhat different from a lot of Europe, for instance Germany is linked to earnings, for the mandatory state pension you have to contribute nearly 19% of your net income between you and your employer. The UK long ago moved to push people into private pension, making it very tax efficient and in more recent times making employer contributions compulsory - so it is difficult to compare us say v Germany as you'd need to take into account peoples private pensions (to a degree).
I just think that when you are taxed on your income that you shouldn't be taxed on your savings as you have already been taxed on it when you earn it.
Go after the big companies and tax avoiders instead
Which is a fair position, but I don’t see how (or why) you would limit that to just cash in bank, people 'save' in many forms. And again i'd reiterate with a £20k ISA allowance any 'average or middle earners' if they take that option would have no need to pay any tax on savings, people who've maxed out those (and their predecessors) will have a seven figure sum, earning tax free.
The problem is people have largely ignored using their ISA allowances as rates were low with 'what's the point' - and are finding out now what that point was!
I just think that when you are taxed on your income that you shouldn't be taxed on your savings as you have already been taxed on it when you earn it.
Go after the big companies and tax avoiders instead
Which is a fair position, but I don’t see how (or why) you would limit that to just cash in bank, people 'save' in many forms. And again i'd reiterate with a £20k ISA allowance any 'average or middle earners' if they take that option would have no need to pay any tax on savings, people who've maxed out those (and their predecessors) will have a seven figure sum, earning tax free.
The problem is people have largely ignored using their ISA allowances as rates were low with 'what's the point' - and are finding out now what that point was!
Spot on !!
Even if you were only getting 0.5% interest on your savings 5 years ago you could now have £100k saved tax free, and you could now transfer that into a new ISA paying c5%. All tax free interest.
not using your ISA allowance when you can is criminal.
Regarding ISAs, does the interest you make on them become available to you at any time? Or is that also ‘locked away’ along with the savings you put in there for as long as you have the ISA open?
Apologies if the question isn’t well structured. I’ve always been a cash saver, and only now looking at ways of seriously making changes. I’ve maxed out Premium Bonds, upped my pension contributions and want to do something else on top.
AFAIK ISAs aren't locked at all, it's just that if you pull cash out you can't replace it if you've invested the max for that tax year. You might find there's a 12m fixed term cash ISA which would lock up the cash, but generally your investment should be accessible at any time.
Not sure I’d go as far as criminal 😂 but there’s no reason for 95%+ of the population to be paying much tax on interest.
£50k premium bonds and £20k each year in an ISA, double if a couple.
be really interested to hear why people are paying tax, if it is ISA (or lack of) related, inheritance which could be a cause, or something else.
I guess I'm fortunate to have 4 pensions giving me an income that takes me into the higher tax bracket. I have maxed my ISA allowance for the past 3 years but prior to that didn't bother (idiot...). Have money in a mix of equities, bonds and fixed rate/instant access accounts. But after the tax free allowance all interest is at 40%.
Regarding ISAs, does the interest you make on them become available to you at any time? Or is that also ‘locked away’ along with the savings you put in there for as long as you have the ISA open?
Apologies if the question isn’t well structured. I’ve always been a cash saver, and only now looking at ways of seriously making changes. I’ve maxed out Premium Bonds, upped my pension contributions and want to do something else on top.
Depends which cash ISA you take, one such as an instant access with Paragon or Shawbrook pays interest monthly. Most of the fixed one's pay on maturity, but shop around as there are a few who pay interest monthly such as Shawbrook again and Kent reliance.
Not sure I’d go as far as criminal 😂 but there’s no reason for 95%+ of the population to be paying much tax on interest.
£50k premium bonds and £20k each year in an ISA, double if a couple.
be really interested to hear why people are paying tax, if it is ISA (or lack of) related, inheritance which could be a cause, or something else.
I guess I'm fortunate to have 4 pensions giving me an income that takes me into the higher tax bracket. I have maxed my ISA allowance for the past 3 years but prior to that didn't bother (idiot...). Have money in a mix of equities, bonds and fixed rate/instant access accounts. But after the tax free allowance all interest is at 40%.
Are the 4 pensions all final salary, or in drawdown/flexible or Annuity. As in reality if you aren't spending all four pensions, if you can you may as well not draw on some of them if that option is available and leave them in the tax free wrapper.
It's not really my place but I'll ask, feel free to tell me to mind my own! But you're retired, have pensions that seem to be considerably more than you need if you are maxing out your 20k ISA limit, what exactly are you saving and not spending £20k a year for? You can't take it with you as they say!
Regarding ISAs, does the interest you make on them become available to you at any time? Or is that also ‘locked away’ along with the savings you put in there for as long as you have the ISA open?
Apologies if the question isn’t well structured. I’ve always been a cash saver, and only now looking at ways of seriously making changes. I’ve maxed out Premium Bonds, upped my pension contributions and want to do something else on top.
Depends which cash ISA you take, one such as an instant access with Paragon or Shawbrook pays interest monthly. Most of the fixed one's pay on maturity, but shop around as there are a few who pay interest monthly such as Shawbrook again and Kent reliance.
Not sure I’d go as far as criminal 😂 but there’s no reason for 95%+ of the population to be paying much tax on interest.
£50k premium bonds and £20k each year in an ISA, double if a couple.
be really interested to hear why people are paying tax, if it is ISA (or lack of) related, inheritance which could be a cause, or something else.
I guess I'm fortunate to have 4 pensions giving me an income that takes me into the higher tax bracket. I have maxed my ISA allowance for the past 3 years but prior to that didn't bother (idiot...). Have money in a mix of equities, bonds and fixed rate/instant access accounts. But after the tax free allowance all interest is at 40%.
Are the 4 pensions all final salary, or in drawdown/flexible or Annuity. As in reality if you aren't spending all four pensions, if you can you may as well not draw on some of them if that option is available and leave them in the tax free wrapper.
It's not really my place but I'll ask, feel free to tell me to mind my own! But you're retired, have pensions that seem to be considerably more than you need if you are maxing out your 20k ISA limit, what exactly are you saving and not spending £20k a year for? You can't take it with you as they say!
Two of the 4 pensions are final salary, 1 is a SIPP (that I started from my own limited company) and in drawdown the other is the state pension. I have a 5th small SIPP that is not in drawdown. I'm saving cos that's what I've always done! Keep thinking I will buy somewhere abroad...have also been considering a rental that I can AirBnB out...but not sure I can be bothered...
Comments
Just one example, not recommending as such but first one in the google search!
https://www.forestersfriendlysociety.co.uk/saving-for-children/childrens-tax-exempt-plan/
I did one each for my children (both adults now) with what is now OneFamily, performed reasonably well. Paid out to them at 16 (took out at Birth).
https://www.onefamily.com/junior-bond/
Feels like this is going to become a real issue this year with interest rates on accounts now representing something of note. I'd have thought if you do not have to file a self return tax assessment you would act blissfully unaware and you're unlikely to be chased, but if you do have to file it's quite hard to avoid declaring interest gained on savings.
I have recently parked the bus on a property purchase and am fortunate to have a sum of money invested across some ISAs but also some non tax wrapped products. I'm not entirely comfortable being involved in the stock market on current outlook (my 2 ISAs are stocks) as my time horizon is still fairly short run, but the cash interest rate paid on a Fidelity/Vanguard type ISA is less than I would get on something like a Marcus cash account (non ISA, therefore subject to tax) - I know I can transfer these to a cash ISA product but I now have more to deploy than the ISA annual allowance due to the aforementioned property change of heart. I guess the answer is you just have to pay tax on the interest income....there are far too many taxes on top of money already taxed for my liking!!
I imagine I am a bit younger than some of the posters in here, but have never found Premium Bonds particularly sexy however the tax free nature of them is becoming more appealing. No idea how much you actually yield on an annual basis though. I've seen the claim of 4% ish but is this realistic? I'm sure all generations have a general disdain for tax, but for mine it is pretty annoying that the ability to accumulate any wealth at all seems to be punished at every turn. You're incentivized to save for things like a property purchase on such a small amount of money in some accounts either tax free or at a preferred interest rate that it doesn't even make a dent in the house value at present. Home ownership is a hardship for many to reach and the BTL type model is really now dead in the South at least, wealth via housing is not that viable. I can see why many now take the punt on far riskier investments, crypto, even gambling etc.
Have tax rates/thresholds increased in line with general inflation and cost of living increases across the years? I'm talking decades not recently. For example, stamp duty being paid on far higher house prices today represents a huge amount of money, usually the amount that most people would consider a good saving for a house deposit is swallowed by stamp. You can earn objectively good money nowadays but the thresholds on CGT/interest income are pretty measly if you are then taxed. I was reading if you are lucky enough to fall in the 100-125k salary band then you pay an effective 60% tax as you lose the personal allowance.
As this turns more into a rant I have completely lost the train of thought I was going with when I first started writing, but if anyone would like to debate/discuss some of the themes then please tuck in lol
almost every other taxation aside from income tax is already a tax on income already taxed, savings are no different.
if there was no tax on savings wouldn’t ‘the rich’ simply hold cash rather than other taxable investments.
it shows why making full use of all allowances such as ISA’s is key.
and yes you are correct on the £100-125k ish being 60% tax (it’s actually 62% with NI).
I maxed out my ISA (cash) and put the max (£50k) into Premium Bonds. The remainder was put into a 1 year bond. I've just started to "cash-in" these accounts as I'll be moving into my new property soon & just calculating my "net" gains.
Premium Bonds have done ok. Worked out at 4.3% if taken over a whole year. Thats tax free. The ISA only paid 3.7% tax free and the 1 year bond was 4%. Interestingly the tax on the bond has, as you say, to be paid via Self Assessment so will not be "assesed" for tax until Jan 2025. Weird that you can get the interest in one tax year but not pay it until the next......and in my case over 12 months later.
You are correct that in recent times allowances have not been growing - certainly not in line with RPI & many have been frozen. The CGT Allowance has been cut dramatically and as from next tax year (7 months away) it will be just £3k. It is very hard to find way to mitigate tax......but then why would you want to when everyone complains that the NHS is on its knees, schools are falling down & there are many potholes in the roads. And one of the reasons we are in this position is that in 2019 millions of people didn't vote for Corbyn's spending plans.
As a financial adviser of over 30 years standing it never ceases to amaze me that on one hand people moan about the lack of money being spent by succesive Governments & on the other hand that they are being taxed too much.
But there many are different (legal) ways to avoid pay tax / obtain tax reliefs if you know where to go / who to talk to.
Despite my apparent moan about tax, I agree with what you say here. I do believe higher tax should be covered by the wealthier to help those less fortunate although I feel the general taxation system is reasonably high here and could be levered in a different way. For everyone, the ability to just SAVE money shouldn't be penalised. If you chose to invest in stocks, funds, products etc which are deemed to be of more privilege then that is slightly different but just leaving money in an account because you chose not to spend or invest it? Just feels crap.
In what is also a comment that I'm sure will be inflammatory to many but I really don't mean for it to be, the aforementioned 100-125k effective 60% rate...that salary really isn't THAT high in modern day Britain and doesn't stretch particularly far. When I was younger I thought that sort of salary would make you feel like a millionaire but it's not the case as far as I can tell, citing house prices alone as justification for that theory. Tax rates at that level seem pretty severe and almost makes you think what is the point of trying hard to earn more money if you'll see even less of it
Middle and relatively high PAYE earners have been hammered the past 13 years. Whether that's loss of Child Benefit, the 62% you refer to, lowering or freezing where the 40% started, the 45p band and lowering, pension contribution restrictions etc.
I fortunately fall into that band/category (although I have took a step back in Salary/job the past few years), i'd estimate I pay around £10k more tax than I would have 13 years ago, and that's before inflation which would make it much worse.
The question is where would you take the extra tax from, rightly the personal allowance has increased a lot the past 13 years, I'd still like to see it go further to help the lowest paid, but I struggle to see where from a salary perspective they can take much more.
You need growth, our tax reciepts are breaking records but we're not seeing the economy performing. I guess we need another "big bang" or huge surge of productivity. I have an outside idea of what it could be but i don't want to collect lolz
Taxed when you spend money, Vat etc.
And if you are lucky enough to have some savings
Taxed on interest.
If you die
Inheritance tax.
One big piss take.
Don't forget depending on your tax position you either get £1k, £500 or for us lucky one's £0 allowance on interest before it is taxed. There's also no reason for people to not use their £20k annual ISA allowance, for 99% of the population £20k per annum is less than what they would save per tax year. The problem has been low interest rates, therefore people have not been using their ISA tax allowance, had people done so then, again for 99% of people, tax on savings interest would not come into the picture.
Our state pension is somewhat different from a lot of Europe, for instance Germany is linked to earnings, for the mandatory state pension you have to contribute nearly 19% of your net income between you and your employer. The UK long ago moved to push people into private pension, making it very tax efficient and in more recent times making employer contributions compulsory - so it is difficult to compare us say v Germany as you'd need to take into account peoples private pensions (to a degree).
Go after the big companies and tax avoiders instead
The problem is people have largely ignored using their ISA allowances as rates were low with 'what's the point' - and are finding out now what that point was!
Even if you were only getting 0.5% interest on your savings 5 years ago you could now have £100k saved tax free, and you could now transfer that into a new ISA paying c5%. All tax free interest.
not using your ISA allowance when you can is criminal.
£50k premium bonds and £20k each year in an ISA, double if a couple.
be really interested to hear why people are paying tax, if it is ISA (or lack of) related, inheritance which could be a cause, or something else.
Apologies if the question isn’t well structured. I’ve always been a cash saver, and only now looking at ways of seriously making changes. I’ve maxed out Premium Bonds, upped my pension contributions and want to do something else on top.
Are the 4 pensions all final salary, or in drawdown/flexible or Annuity. As in reality if you aren't spending all four pensions, if you can you may as well not draw on some of them if that option is available and leave them in the tax free wrapper.
It's not really my place but I'll ask, feel free to tell me to mind my own! But you're retired, have pensions that seem to be considerably more than you need if you are maxing out your 20k ISA limit, what exactly are you saving and not spending £20k a year for? You can't take it with you as they say!