Mrs Motties mum pays @ £75k a year for her care yet is still taxed very heavily
Ask yourself - what's her tax band, higher I assume to be paying out 75k a year?
Stop paying tax on savings.
Most you'll be getting is , for the sake of argument, 4.75%. Less 40% = 2.85 after tax and the £500 allowance.
or 4.75% less basic rate 20% =3.8% after tax and the 1k allowance.
First, use Isas. Only 20k a year but it mounts up. If Dad is still around he's inherit the Isa money still inside the ISA, though you wouldn't.
Don't forget Dividends from pensions are tax free, so look at rates. Google "best dividend rates".
E.g. HSBC shares have paid about 4.8% in divis, while the capital has grown 65%. Past performance yada yada.
That 65% overwhelms anything else of course.
Then. use this Govenment Gilt. You can buy it at Freetrade .com in their free tier:
I have put this elsewhere but I'll write it slowly..
The 1/8th % or 0.125% is the interest, called the "coupon". yep, you pay tax on that.
But the
point is the rest of it.
You pay today's price, (dirty just means it takes account of accruing interest) which is 94.321
31st Jan 2028, it will be worth £100 unless UK collapses. Individual Banks/Building societies would have collapsed before that. They have done it before.
so you get (100- 94.321)/94.321 = 6.02% between now and then. Plus the 0.125%.
The Net Yield is the figure you get after tax (taxing that tiny bit, 0.125%, at basic rate 20%.
The POINT of these things is that the main part of the growth, is Capital Gain, and there is no CGT payable on Gilts.
So you would have to get about 3.885 / 0.8 = 4.85% to beat it.
Or 3.885 /0.6 = 6.475% if you're a higher rate tax payer.
You might get that for short periods, small amounts, etc, for the lower tax band..
One caveat,the selling price you'd get between now and 31/01/28 depends a bit on interest rates -it could have a hump or dip from the straight line, plus there's a spread, which could be as much as 1%.
I do have a Chase account which is convenient as a temporary holder, which pays 4.5%, but 4.5 - 40% is only 2.7%.
So on 100k, Chase gets £2700, Gilt gets £3885.
Plus, which will apply to some people, the money you get in from that capital gain is NOT counted as income so you have effectively removed some of your savings income as far as your tax band is concerned. Keeping all/more of the income in the lower band is a commonly used benefit.
Make sense?
Not advice, but what I'd do is learn from the previous 2 years. Watch what's happening to funds with high dividends. They tend to be pretty solid investments.. Vanguard high dividend funds ( from a whole bunch of companies) have returned about 30% in the last 12 months. Some (Distributing or Income variety) spit out the dividend of around 3.5%, others (Accumulating) reinvest it.
Check VHYL, VHYG.
Other whole sectors, have done well for a long time. European banks X7PP for example +85% in 18 months.
You would have to learn a bit - don't just pile in, but a very conservative play should beat the building societies easily, and it's easy to switch to and fro, free. Look at Freetrade (I've not used) or Trading 212.
E & OE!
