Is tax free investment a good idea for non-tax payer?


M

mike

I'm unemployed (after 40 years working - but not claiming ANY state benefit - my
wife still has a job thank G), and I will soon receive a modest inheritance. As
I don't pay any tax (as I'm not earning anything), is there any point in
investing the inheritance monies in tax free investments - such as ISA or
Savings Certificates?

Also, do I have to pay tax on any non-tax-free(!) investments, given that the
interest from such investments will be less than my personal allowance (ie is
tax on investments independent of personal tax allowance)?

Many thanks
 
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G

GSV Three Minds in a Can

from the said:
I'm unemployed (after 40 years working - but not claiming ANY state
benefit - my
wife still has a job thank G), and I will soon receive a modest inheritance. As
I don't pay any tax (as I'm not earning anything), is there any point in
investing the inheritance monies in tax free investments - such as ISA or
Savings Certificates?
Only in so far as they may offer you a higher interest rate, plus what
you stuff in an ISA now will be tax free in future - remember you can
only stuff away 3k/year as cash (going down shortly), and one day you
may have a pension and be paying tax having a 'filled up' (mini cash)
ISA (and another for your wife) is a good plan, if you have the cash
available.
Also, do I have to pay tax on any non-tax-free(!) investments, given that the
interest from such investments will be less than my personal allowance (ie is
tax on investments independent of personal tax allowance)?
Depends on the investment. If you stick to things which pay interest,
then you can get any tax back - better yet you can fill in the R85 form
and get interest paid gross (no tax deducted). If you want to talk about
shares which pay dividends, then you can't get the tax deducted back
(although if you crept into the 40% tax bracket the government would
expect you to pay the extra). In your position I'd think pretty
carefully before investing in shares anyway, unless you have some reason
to lust after long term capital growth.
 
M

mike

Depends on the investment. If you stick to things which pay interest,
then you can get any tax back - better yet you can fill in the R85 form
and get interest paid gross (no tax deducted).
Thanks very much for that GSV - much appreciated. Just to follow up on that last
point...

I'm thinking of putting most of the money into short term (1 year) bond(s),
purchased via the bank. as they mention the R85 you pointed out. So the
personal tax allowance is *not* just applied just to "Earned income from
employment". The bloke down the pub :) seems to think is it - which seemed
mighty odd to me. I'm also trying to decide whether I should classify myself as
retired - or unemployed (unemployable) (sigh).
 
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G

GSV Three Minds in a Can

from the said:
Thanks very much for that GSV - much appreciated. Just to follow up on
that last
point...

I'm thinking of putting most of the money into short term (1 year) bond(s),
purchased via the bank. as they mention the R85 you pointed out.
Two points on that .. make sure you won't need the money before the year
is up (or you'll get screwed), and make sure the rate is enough higher
than a 'variable rate' account to make up for the risk that rates will
rise once or twice, or even three or more times over that year. If you
want to peruse what is on offer,
http://www.moneyworld.co.uk/savings/
(although I haven't been there for a while, so it may have moved).
So the
personal tax allowance is *not* just applied just to "Earned income from
employment". The bloke down the pub :) seems to think is it - which seemed
mighty odd to me.
Blokes at pubs can usually be relied upon for data on the quality of
beer. Not the best place to ask financial questions. 8>.
I'm also trying to decide whether I should classify myself as
retired - or unemployed (unemployable) (sigh).
Call yourself whatever you like .. there's no legal requirement to admit
to retired or unemployed. 'Resting' is OK too. fwiw, if you are over 60,
the government will kick in any required NI contributions (if you are
not working). If you are under 60, you might want/need to pay class3 N
in order to preserve your rights to a full pension. The nice people at
Newcastle can tell you, along with giving you a (state) pension(s)
forecast. Well worth it . form (BR19? iirc) available online.
 

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