What to do with an inheritance?

[PersephoneParlormaid]

I’m expecting a good inheritance and not sure what to do with it. I thought about buying a house to rent out but don’t want to end up paying CGT. Also not keen on S&S type products as I don’t want to end up with less than I got originally, so low risk options.
My aim is to help my kids with a house deposit when the time comes, and have enough to keep myself in old age, so I do want to grow it.
So I’ll max out this year and next years ISA, experiment with maximum Premium Bonds for a year, but then what? Just find the highest interest rate bank accounts or is there something else?

Why buy a house and put child in it? Why not enable the child to buy there own house with help of a hefty deposit you can give them

Maybe wait till you have it expecting doesn't mean you'll get it

OP I think you need to do a lot of reading or get a IFA. You are in danger of losing a lot of your money through inflation and taxes on interest by being too cautious. Meaning you will "end up with less than I got originally".

You'll be charged second home stamp duty and your have to declare rental income from your ds, so you'll have to do a self assessment tax form - which is a pain.

I am getting it

This is why I decided against it

Not if you can keep it inside a tax wrapper - pension or isa’s if you are in the uk. It might take a few years to drip feed in depending on the amount but with some knowledge/planning should be doable.

100% agree.

I went to my bank and spoke to a financial advisor there, who gave me advice and options and have been happy with the outcome

Generally you should use (in roughly this order):

• Isa allowance
• savings to the point at which you would be paying tax on your interest
• pension to the maximum permitted (depends on your own circumstances)
• isa and pensions for kids if you want to secure their futures
• some level of investment to avoid the negative impact of inflation

Premium bonds are just a permanent ticket to a lottery. The average returns are poor but of course there is always a chance you'll win a larger amount and you only need to beat your after tax interest rate on the top paying savings account. As such if youre maxed out on savings, isa and pension allowance its fine to take a punt.

A pension is super tax efficient. You’ll get 20% immediately on top of what you pay in (40% if you’re a higher rate tax payer).

If you run the numbers, a pension is better than an ISA, even after paying tax on the way out due to the initial up front tax free investment and the power of compounding.

You seem sure you don’t want to put anymore in your pension but you are also talking about premium bonds and savings accounts which makes it sound like you don’t have much financial knowledge.

I need to speak to my IFA because it is doing this already (pension). I was told I have had to pay CGT because I had to move money to pay out for school fees, which obviously happens every term, but I haven't been clobbered like this before.

If you're selling investments from a general investment account, either to spend the money or to move it into a tax wrapper, then you will need to pay CGT on the gains. Once it's in the wrapper you can buy/sell/withdraw without tax (edit: that is, without tax on gains; withdrawing funds from a pension may incur income tax).

There's no way you should be paying more tax than you've made on the investment overall, but it is tax on the total gain, so if you've had the investment for a long time the tax could be more than the gain in the past year.

premium bonds are excellent if you max out your Isa allowance and are a higher rate tax payer, remember the interest (prizes) youe earn are tax free

Premium bonds are not excellent. You might do well or you might get nothing. It's a gamble.

If you've maxed out your pension allowance for the year and you don't have pension carry over allowance and you've maxed out your isa and you would prefer a chance of getting something over paying tax on certain income then they're ok.