What to do with money before the tax man gets it
Discussion
Say that a not insubstantial sum of money had just been recieved from someone selling something like some land. The tax man wants his 40% share as capital gains, but he will not want this for another year.
In the mean time the bank is offering a 4-5% interest account with interest paid monthly and no risk.
But what other options are there? Obviously the risk needs to be low as the money is Gordon Browns, but surely there are better returns avalailable.
Please no replys with, if you invest in this venture of mine I promisse you 1000000% return in days.
Cheers
In the mean time the bank is offering a 4-5% interest account with interest paid monthly and no risk.
But what other options are there? Obviously the risk needs to be low as the money is Gordon Browns, but surely there are better returns avalailable.
Please no replys with, if you invest in this venture of mine I promisse you 1000000% return in days.
Cheers
Might be talking bollox here, and no doubt an accountant will be along shortly to correct me if I am wrong, but I think if you want to rollover, you have to rollover into something similar. We sold a family owned hotel business a couple of years ago and wanted to invest the proceeds into property investments but the accountant said this was a big no no. Off the top of my head can't remember why not though.
If you have a mortgage, change it to a bank account style mortgage, put the money into the savings side and you are earning a very tidy sum tax free and with more or less instant access to your money when you need it.
Current mortgage rate x your tax rate
e.g. 6% x 40% = 8.4% rather than 5% - 40% = 3%
The actual sums are a bit more complicated than that as any normal mortgage payments will be paying off more capital which you will not pay interest on, but for anyone with big mortgage it is the way to go. If you have MS Excel on your computer, try using the "Loan Amortization.xlt" template, it a real eye opener.
Current mortgage rate x your tax rate
e.g. 6% x 40% = 8.4% rather than 5% - 40% = 3%
The actual sums are a bit more complicated than that as any normal mortgage payments will be paying off more capital which you will not pay interest on, but for anyone with big mortgage it is the way to go. If you have MS Excel on your computer, try using the "Loan Amortization.xlt" template, it a real eye opener.
mutt k said:
Might be talking bollox here, and no doubt an accountant will be along shortly to correct me if I am wrong, but I think if you want to rollover, you have to rollover into something similar. We sold a family owned hotel business a couple of years ago and wanted to invest the proceeds into property investments but the accountant said this was a big no no. Off the top of my head can't remember why not though.
You can reinvest in a range of things, but it must be a 'qualifying investment', and one of the no-nos is property. Otherwise there doesn't have to be any link between the investment which made the gain, and the one you want to roll the gain into. (Note gain is not cancelled, only deferred until you realise it again...).
You can also gat even better reliefs from EIS investments, where you get a 20% income tax rebate as well as CGT deferral relief.
Thanks for the replies so far. Unfortunately we cant roll over the entire amount as soe has already been spent. The Gordon Brown share is just sat in an account gathering its 4 - 5 percent. Although we will get a fairly good return over the year I cant help thinking there must be something else we could be doing.
Any bankers out there with any high return schemes?
Any bankers out there with any high return schemes?
d5hef said:
Say that a not insubstantial sum of money had just been recieved from someone selling something like some land. The tax man wants his 40% share as capital gains, but he will not want this for another year.
In the mean time the bank is offering a 4-5% interest account with interest paid monthly and no risk.
But what other options are there? Obviously the risk needs to be low as the money is Gordon Browns, but surely there are better returns avalailable.
Please no replys with, if you invest in this venture of mine I promisse you 1000000% return in days.
Cheers
First of all, are you a UK citizen? If not, you can invest it offshore, and it is, in general, tax free (I mean your gains over the year are not taxed).
If you are a UK citizen, it is not a great time to try and get a decent rate. The normal way you get a better return is by lending to a slightly worse credit than the bank. I don't mean a bloke down the pub either. Bonds issued by goood firms (Ford, for example) tend to yield a decent amount more than government bonds, but this gives much less than it used to.
I still think that for a balanced set of risk, a corporate bond fund, based on shorter dated paper, is a good way to go. As long as it is diversified, the risk is not too great. If the sum is only around 14,000, you can open a couple of Isas, so it is tax free (one now, one in April), and, if you are married, so can your wife, so you can total 28k of investment over the next few months without paying any tax on the returns.
I'd not recommend longer dated bonds. Although the coupons that they pay are larger, you'd actualy need to sell the bonds back before maturity to get your money out, and they could easily have dropped in value at that point.
thepeoplespal said:
If you have a mortgage, change it to a bank account style mortgage, put the money into the savings side and you are earning a very tidy sum tax free and with more or less instant access to your money when you need it.
Current mortgage rate x your tax rate
e.g. 6% x 40% = 8.4% rather than 5% - 40% = 3%
The actual sums are a bit more complicated than that as any normal mortgage payments will be paying off more capital which you will not pay interest on, but for anyone with big mortgage it is the way to go. If you have MS Excel on your computer, try using the "Loan Amortization.xlt" template, it a real eye opener.
I'd second that. Every bit as important as the headline return is whether it is taxed or not. If the Isa route does not work, you are saving yourself a good chunk by the above method.
You don't even necessarily need to change the type of your mortgage. You can make an overpayment in lots of ordinary ones, and then get the money back at a later date.
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