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Where can I put a substantial sum of money?

(41 Posts)
gemmiegoatlegs Tue 15-Jul-08 10:21:30

We are finally selling our house and will be completing next week. This will free up a fairly big chunk of money which I want to tuck away for the deposit for next time we buy. We are going to be renting for the next couple of years and don't need the house sale money to live off.
I want to squirrel the money away in different places (not putting all my eggs in one basket so to speak)
So does anyone know how much money I can gift to my children before it is declared as income?
How much can dh and I put into an ISA each?
Which accounts have the best interest rates at the moment?
Are premium bonds a worthwhile investment?
Whether HMRC will count this money as income when working out our tax credits (we don't get a lot anyway)

ThePettyandIllinformedGoat Tue 15-Jul-08 10:23:18

you can put 6000 into a cash isa and possible another 6000 into investment isa, each.

a part from that i don[t envy you putting large chunks ofmoney away. stuff it in your mattress?

Tortington Tue 15-Jul-08 10:23:26

i say an advert for the halifax that was offering 10% if you left your money in a while - that was about a montha go though

go to moneysavingexpert.com

premium bonds are not an investment.

Lizzylou Tue 15-Jul-08 10:23:33

Sorry, no real help, just read OP and thought, *my account*.

gemmiegoatlegs Tue 15-Jul-08 10:27:49

i know bonds aren't an investment as such but I'd heard people who have a lot in PBs 'win' regularly.

OOOH another Goat! Hello!

gemmiegoatlegs Tue 15-Jul-08 10:29:25

aha, have also seen on the HMRC site that premium bonds are not taxable. That sounds good!

allgonebellyup Tue 15-Jul-08 10:29:56

you can send it to allgonebellyup, at this address....

gemmiegoatlegs Tue 15-Jul-08 10:33:25

i'm not showing off - honestly.the money is a stern exchange for the fact that we have resigned ourselves to living in someone else's house, not being able to use blu tack on the walls and generally no longer being the masters of our own destiny!

hopefully Tue 15-Jul-08 10:46:57

Can you speak to a financial adviser? There's a number of different places you could put your money, but an adviser would be able to come up with the most tax efficient options.

a) Off the top of my head I can't remember if there is a limit on the amount you can gift to your children tax free, but if you do this you can't just take it back when the time comes to buy (HMRC will realise you are trying to defraud them), and also if you die within 7 years there may be an inheritance tax liability
b) You can put up to £3,600 into a cash ISA or up to £7,200 in a stocks and shares iSA (Or £3,600 in cash and the difference in stocks and shares), which will grow tax free
c) Check moneysupermarket.com or somewhere to find good interest rates
d) premium bonds are IMO a complete waste of time in most situations - they equivalent interest rate is only about 3% - however, if you are higher rate taxpayers, this may equate to a good investment.
e) if you are planning on putting the money away for a long time (10 years plus) then equities are almost always the best investment (investing in a fund, in other words), but over a shorter period there is no guarantee that they will outperform a savings account

ermm... can't think of anything else!

MrsTittleMouse Tue 15-Jul-08 10:47:28

You are best off going to money saving expert. I can give you a general summary though -

You (and your DH) can only put £3600 into an ISA each per year. That's a cash ISA. I wouldn't want to put money into shares right now unless you won't need it for at least 5-10 years. If you want to put it into shares then rather than pick individual shares it's better to use a tracker - and you have another £3600 each that you can invest tax-free in an ISA.

Premium bonds do not give a good rate of return unless you are incredibly lucky. You're better off with a savings account.

If you can be sure that you won't need the money in the next year then you can put it into bonds where you have to keep it in for 1 or 2 (or whatever) years. But there are severe penalties for taking the money out early (often you lose all the interest).

It's best to spread the money around several savings accounts to spread the risk. It's highly unlikely that a bank will go under, but if they do, only the first £35,000 is insured (i.e. you will only get the first £35,000 back). The website I linked above has details of all this and a list of the highest interest easy-access accounts.

One last point, if you don't work, then you can use your income tax allowance to save paying tax on some of the interest. If it's a large sum of money (and I'm guessing it is) then you should put it into your name, and then you can claim part of the tax back at the end of the financial year.

You can probably tell that this is something that I've thought about. We have a large deposit saved for a house, but we're holding off buying for now.

hopefully Tue 15-Jul-08 10:48:30

If you want to give money to your children, there are also various trust options you can use, which may be more tax efficient than a straightforward gift and sticking it into a savings account - again, an adviser would be able to help. You can find IFAs on www.unbiased.co.uk

MrsTittleMouse Tue 15-Jul-08 10:49:06

Snap hopefully.

MrsTittleMouse Tue 15-Jul-08 10:51:09

Sorry - one last point. You will have to declare any income that you get from the money - i.e. any interest from the savings accounts, dividends from shares etc. to the child tax credit people. But if you're not planning to live off the money then they aren't interested in the lump sum.

hopefully Tue 15-Jul-08 11:25:37

Great minds think alike!

MrsTittleMouse Tue 15-Jul-08 11:28:09

And fools seldom differ! wink

gemmiegoatlegs Tue 15-Jul-08 11:50:32

thanks everyone, you've given me some good starting points...my head is just so upside down at the mo with all the other million and one things I need to be planning! Thanks for drawing my attention to the bit about my tax allowance MRS TM, I am a student at the moment so haven't used any of my personal allowance this year.

fishnet Tue 15-Jul-08 16:55:04

We're just about to do exactly the same thing. You need to ensure you don't put more than £35k into any account since that is currently the amount you will get back under the guarantee scheme. You and your DH could each have an account with each savings bank though.

The halifax account will only allow you to make small deposits because its a regular saver account so the 10 per cent can only be earned on a small amount. If you are very organised though you could have your savings in another account and then sweep across the maximum deposit every month. I can't be bothered because it doesn't make that much difference.

The best accounts at the moment seem to be Kaupthing who pay 7.15 per cent if you have their fixed rate account for six months. Wouldn't go any longer than that since the rate doesn't increase and because its a fixed rate you wouldn't benefit from the likely raise in interest rates in future months.

If you don't mind tying up your money for three years by far the best option after your cash iSA allowance is national savings since they pay tax free so if you're a higher rate tax payer you earn the equivalent of about 8.5 per cent on a taxed savings account IYKWIM. We don't want to do this though because it ties our money up for too long.

Go onto one of the financial websites and they will give you the best accounts. beware of the accounts which have a bonus though because this means that although the interest rate might look good, it will reduce after the period of the bonus interest.

Its all a bit of a hassle. We have to have nine different accounts!

noddyholder Tue 15-Jul-08 16:58:28

If you don't want to divide it into 35k chunks then national savings or northern rock are underwritten by the treasury and completely safe.National savings interest is not so good though.Nationwide was one of the only banks/bs that had more deposits than mortgage lending when the Nr thing happened and many northern rock savers put their £ into the nationwide so it is pretty safe too.

noddyholder Tue 15-Jul-08 16:58:58

kaupthung too scarey!

LittleMyDancing Tue 15-Jul-08 17:00:46

don't forget that your DCs have tax free allowances as well, so you can open an ISA in each of their names and put the maximum allowance in there. If they're under 18, you can still retain control of the money, but you save on the tax. wink

fishnet Tue 15-Jul-08 17:03:01

why are kaupthing scary noddy - they were my best option?

National savings index linked do look like a low rate at first but because the payment is linked to inflation (and so likely to o up at the moment) plus tax free they are actually a good bet depending on your tax status. OP is not paying tax but her DH might be.

Fill me in about Kaupthing though before I make a mistake. This area is a minefield!

fishnet Tue 15-Jul-08 17:06:11

Littlemydancing ISAs for children don't work in this situation. If the parents contribute the capital and the interest earned on savings for any child is over £100 then the parent pays tax on it.
HMRC are unfortunately wise to that one

noddyholder Tue 15-Jul-08 17:08:20

I wanted to put ours in kaupthing because the interest is good and instant access etc but when I looked into it it seemed that the icelandic econopmy and banking system is one of the least stable in the world.I would check this out though as many people think its great

fishnet Tue 15-Jul-08 17:10:18

Ah I think they've signed up to the guarantee scheme though so they are as safe as any UK banks. Plus they guarantee to be at least 0.3 above base rate for the next few years.

Will do some further investigating though thanks

Twinkie1 Tue 15-Jul-08 17:12:33

It is nothing to do with the Icelandic Economy they are registered with the FSA in the UK and so you have all the protection that the other banks have. (DH is a financial trader and that is what he told me)

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