PERSONAL SAVINGS ALLOWANCE

[dexter999]

The wife and I have been lucky enough to get a substantial sum from 2 family inheritances, and we are wondering where's best to put our money re Personal Savings Allowance.
We have no mortgage and no debts, and are both retired with and are within the 20% tax bracket.
We have maxed out all our cash ISA's and premium bonds to protect the money from tax, but we still have about £150k in various variable and fixed rate savings accounts.
This will of course attract interest from the tax man for PSA purposes.
We regularly move the money about to the highest interest provider.
Where can we put this money to try and alleviate the PSA tax we will have to pay?
Do you think we should leave the money in the variable interest accounts and just pay the tax, or where can we put it?
We do not like the idea of stocks and shares.
Any ideas and advice would be welcome.

[strawn]

You could consider buying coin-of-the-realm gold coins i.e. Sovereigns or Britannias. You can buy them, and store them, from/at the Royal Mint and/or various commercial firms. There will be no income tax or capital gains tax on them.

Or, if you are happy to trust the government with your money you could lend to it by buying "gilts". By choosing gilts with a low "coupon", i.e. interest payment, you would concentrate your return in capital gains which, in the case of gilts, are tax-free.

Since you are leery of "stocks and shares" you might be wise to consult a financial adviser before you plunge into gilts. Be sure he explains the difference between Index-Linked Gilts and Fixed Interest Gilts.

[dexter999]

Hi Strawn, sorry about the delay in replying - unfortunate circs dictated I couldn't.
I have about £10k worth of Britannia's already, I don't fancy risking to much in these, they are quite volatile.
My other circumstances haven't changed.
Ive looked at Gilts and they seem rather complicated to me and I don't trust Financial Advisers. I must be old fashioned!

If I held on to the savings in the high interest accounts I have, after I have paid my PSA tax I must surely still be better off.

Example, if the interest rate I have is 5% for £100k savings I would get £5k interest but after the £1k PSA I would be taxed at 20% for the remaining £4k which is £800 leaving me with £4200 which equates to 4.2% interest.... Am I right in saying this?

[strawn]

Yes, after 20% income tax 5% -> 4.2% which is still higher than the official inflation rate (CPI inflation).

If you rule out stocks and shares, gilts, and gold coins your options are narrow (in my amateur view).

Have you thought about a little speculation in foreign exchange e.g. bank accounts in, say, Swiss Francs and Singapore dollars?
I think about it from time to time but have never tried it. But then we have ample ISA capacity so we don't share your problem.

Would lending some money, interest-free, repayable on demand, to your offspring appeal?

Last thought: is either of you qualified for the band that's effectively an extra savings allowance for those on low incomes?
Could you rearrange your affairs so that one of you is?

https://www.gov.uk/apply-tax-free-interest-on-savings

[strawn]

Yes, after 20% income tax 5% -> 4.2% which is still higher than the official inflation rate (CPI inflation).

Oops, I meant 'after 20% income tax 5% -> 4%'. Sorry.