Where are you in Maximising UK tax-free income

[Raptor]

Moderator Message:
moving from practical to strategy. Warning was given on keeping to hyp shares. Raptor

[WessexBoy]

Given that I have used this tax year's ISA and, with next tax year in mind, that I have more than £20k, I will turn attention to HYP that pay divi's this year.

Dividends incurring no additional tax to basic rate payers are now restricted to £ 5,000 per year, possibly reducing to £ 2,000. With that in mind, investing potentially taxable assets in higher yielding shares makes less sense from a tax viewpoint than it used to, if you have sufficient to invest that you are likely to approach these limits.

But we are now November and tax year ends in March/April. So must look for HYP that pay divi in that period.

[Itsallaguess]

Can I please ask how you find the premium-bonds side of things working out?

I ask for two reasons -

1. To check on your thoughts regarding the actual return on them. Is it 'as expected'?

2. To check if you carry out many 'transfers' between cash/PB's/cash/PB's etc.

The actual return is indeed as expected, it's lumpy but most months a £25 prize, some months nothing some months a handful. I expect sub 1% and get it.

I have filled cash into interest paying current accounts, regular savers and the balance into PBs. I have only moved out of premium bonds a few times.

It is easy to do on-line. When I pay back in I sit out the draw until the following month so there’s an initial drag on return. It is better than nothing and your money isn't tied up.

Thanks kempiejon, that's reassuring to know. I think on the back of these comments I'll dip my toe into the Premium-Bond market with a chunk of my 'market-crash' funds, specifically to carry out two things that aren't currently happening -

1. Get 'some sort' of return on the capital. It's currently languishing in my broker account and being eaten away by inflation whilst doing so. I don't expect to have to have access to it instantly, and a few days turn-around will suit my needs if I can get hold of it in that sort of time-scale if necessary.

2. Reduce my overall broker-exposure, taking into account equities and cash that are sitting in the account. This is probably as equally important to me as the above point, and whilst there may be almost no risk to this type of situation, or very minimal at least, I think just knowing the risk is reduced will give me some additional benefit and justification for carrying out this process.

3. It enters me into the 'you've got to be in it to win it' game of chance. If I only get the average of 1% returns, then so be it, but it'll be 1% more than I'm currently getting, and in the meantime I've got a 'chance' of greater prizes. I also know how stupidly excited I will get if I win absolutely anything at all, and it's a long winter sometimes, so even an average return will give me some ongoing pleasure, as daft as that sounds....

I'll of course let people know how I get on with this process, especially transfer-times etc., as it sounds like an area others might be interested in looking into too.

Cheers,

Itsallaguess

[kempiejon]

3. It enters me into the 'you've got to be in it to win it' game of chance. If I only get the average of 1% returns, then so be it, but it'll be 1% more than I'm currently getting, and in the meantime I've got a 'chance' of greater prizes. I also know how stupidly excited I will get if I win absolutely anything at all, and it's a long winter sometimes, so even an average return will give me some ongoing pleasure, as daft as that sounds....

Itsallaguess,
I do not get 1%, I calculated some numbers last night and 0.8% seems to be the most recent 12 month period. I think I have only ever won the minimum prize amount - was £50 now £25. I do sometimes have fun when I get the e-mail at work to say "You've won a prize" and I cannot check the actual amount until I'm at home with my log on details. I collect the significant other from the station, say I've had that mail and all the way home we could be millionaires.
Here's a handy article https://www.moneysavingexpert.com/savings/premium-bonds
and hopfully realistic calculator for premium bonds https://www.moneysavingexpert.com/savin ... alculator/

Once the tax on savings accounts interest was suggested one only gets a £1000/£500 allowance I thought about premium bonds to go along side my NS&I index linkers. As you say you may as well be earning something. I also take some pleasure in (currently) exempting myself from threat of tax.

[PinkDalek]

... Thanks kempiejon, that's reassuring to know. I think on the back of these comments I'll dip my toe into the Premium-Bond market with a chunk of my 'market-crash' funds, specifically to carry out two things that aren't currently happening - ... I'll of course let people know how I get on with this process, especially transfer-times etc., as it sounds like an area others might be interested in looking into too.

Cheers,

Itsallaguess

In case of interest, there's a 5 page Topic on Premium Bonds over at "Bank Accounts Savings & ISAs":

viewtopic.php?f=11&t=4337

That might be good place to continue, making it easier to find the relevant topic in the future ...

[Itsallaguess]

The actual [Premium Bond] return is indeed as expected, it's lumpy but most months a £25 prize, some months nothing some months a handful.

I expect sub 1% and get it. I have filled cash into interest paying current accounts, regular savers and the balance into PBs. I have only moved out of premium bonds a few times. It is easy to do online. When I pay back in I sit out the draw until the following month so there’s an initial drag on return. It is better than nothing and your money isn't tied up.

Just wanted to pop back in as promised, and say that I did indeed transfer some of my allocated investment-cash (down-turn-riding / opportunity taking if there's a major crash) into some Premium Bonds, and this was the first month that I've been eligible for the draw.

Anyhow, I'm pleased to report that I won a couple of £25 prizes, so a good start!

The bulk of this cash was sat in various broker-accounts earning nothing at all, so it's exciting to be in the draw each month, and even if I only get the average payout, then it's still a great deal better than the zero-yield it would have delivered if I had not acted.

I actually also feel that the cash is clearly much better protected in Premium Bonds, as there's obviously some broker-risk in allowing them to hold relatively large amounts of cash, so getting any sort of return at all whilst even slightly increasing the safety of the cash itself is a benefit I'd not really considered until now.

Thanks again for the info that helped drive my decision - I'm very pleased to have taken this particular option for this particular slice of war-chest capital.

Cheers,

Itsallaguess