Who do I need to speak to?

[Scrambolini]

Hello. We've sold our house and are going into rented accommodation because we couldn't find a place to buy. We will have around 500k from the sale after paying off the mortgage. We need to seek advice for what to do with the money, particularly in relation to the tax implications of income from interest. What sort of advisor should we be looking for - does a person who knows about the best savings accounts also know about tax? Does a tax person (accountant I guess?) also know about investing money? Forgive me if these are daft questions, I have no experience with this kind of thing. Any pointers on how we can go about this including how we can find an advisor would be greatly appreciated.

I would look for a Financial Planner who would look at your whole situation, produce a financial plan, and look at protection needs. They may produce a plan and you implement it or you pay them to implement the plan and to do annual reviews.

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Those sites have search systems to help you find a financial planner.

Short guide to finding financial advice: meaningfulmoney.tv/2022/11/14/financial-advice-checklist-find-adviser/

Accountants aren't allowed to give financial advice. You need a financial advisor.

To find one, I would be asking family and friends who they use. Someone will have one for sure.

We're only wanting to put the money away for a year or so (possibly less) so it's not a long-term or sophisticated financial plan we want but rather to know what savings account(s) to put the money in to best manage the tax exposure.

That's helpful to know, thanks.

Assuming you are going to be buying a house at some point in the not too distant future I would not tie it up anywhere. You can get over 5% interest on instant access accounts at the moment so I would just be popping it into a few different accounts. Santander have one for example so you could both open one each and put in 85K.

That's just my unofficial advice. Retired accountant here.

It is not worth getting financial advice or putting it into the stocks or shares or bonds as you will need it in the foreseeable future.

@Poochypaws that is exactly what I had been thinking we should do but then I went down a rabbit hole reading on This Is Money (or a similar site) that one should think carefully about the tax implications of different savings set ups, e.g. if you put the money in a one year savings account it makes a difference to your tax position (as regards your savings income allowance) whether you take the interest monthly or only at the end of the year. So then I was thinking we need advice on which savings accounts to use for tax efficiency. Am I overthinking this? Will there actually not be much difference in how much tax we have to pay on the income from interest?

@Poochypaws just to add: if, say, we put the money in a savings account for 9 months or a year fixed term it makes better income generating sense to have the interest be compounding and only take the interest at the end of the term. But if we do that then only a single tax year’s personal savings allowance will be used. I don’t know which we should do.

I maybe wrong but look at NS&I one of their accounts is over 6.0% interest and I think all your money is protected not just85grand.

Two full holdings of premium bonds, two full cash isas is a good start but will only cover 140k. In April you’d be able to move another 40k to your cash isas so keep at least 40k available instant access to move then.

Are either of you higher rate tax payers?

As pp has mentioned NS&I are offering excellent rates with one year bonds. The income bond pays monthly and the growth bond at the end of the term. You would have the benefit of being able to put 500k with same provider.

This probably covers most of the issues., although the return from premium bonds is not guaranteed and will probably work out less than a fixed rate or even instant access after tax, unless you're lucky enough to win a bigger prize. You could well decide it's worth the risk though (I think I would)

If you're looking to buy again within the next year or so, realistically you only have this and next tax year's tax and ISA allowances and you aren't going to invest, it's never going to be worth paying for advice because, apart from using your ISA allowances, considering premium bonds, splitting the money between you and being mindful of when interest is paid vs tax years, there's not really any more you can do. You're almost certainly going to pay quite a bit of tax, but that's because you're going to earn quite a bit of interest (£500k for a year at 5-6% is £25-30k)

Moneysaving Expert gives a full guide:

Best savings accounts: 5.2% easy access or 6.2% fixed rates (moneysavingexpert.com)

Assuming you are married and the money belongs equally to you, I'd get two lots of £50k PBs, £20k in cash ISAs to use this and next year's allowances - for this year, if you're sure you won't move in well under a year, perhaps go for a 1 year fix (but look out for the MSE advice on the little bit of flexibility re access to ISAs).

For the rest, for simplicity and flexibility, you could each open a Santander savings account and opt for monthly interest (be quick, it's only available for a few weeks or could sell out earlier) and you'll get just over 5% instant access.

Finally, last consideration is protection against banks going bust, but you don't have to worry about this in the short term as you have extra rights for six months following sale of property. After this, don't have more than £85k per person per bank (sometimes more than one bank is covered by one banking licence and here the licence defines the 'bank') but this limit doesn't apply to NS&I.

@Hollyhead we are both higher rate tax payers.

Thanks @ShanghaiDiva. I actually saw these and reading about them is exactly what got me confused. :(

Am I right to think it sensible to go for the income bond to make use of two different tax years’ personal savings allowances? Or would the growth bond still be better because of the compound interest effect - notwithstanding the interest all coming at once (against only one tax year’s personal savings allowance)? We’re both (just) in the higher tax rate band.

I’m not AT ALL a numbers person and tax scrambles my brain.

@BarbaraofSeville this is HUGELY helpful, thank you very much indeed. Greatly appreciated.

@Scrambolini
@BarbaraofSeville always has sound sound advice on the money threads. Personally I’ve gone for the income bond to so that income goes over two tax years.

My, thank you @ShanghaiDiva, most people seem to think I'm crazy with all my wild ideas about putting money in savings instead of overpaying a cheap fixed rate mortgage and not thinking about an IFA until you have a six figure sum to invest.