January 18, 2005
| Five Things To Do With A Windfall |
It's January, traditionally a time for pay rises and bonuses. You may have received some money that you weren't expecting too (inheritance/gifts etc). If you are lucky enough to have come into a lump sum of money and are wondering what to do with it, here are five ways to use £5,000.
1. Reduce Your Debt
It's dull but so worthwhile.
There's no point having a savings account, even one earning 5%, if you have debt on credit cards/loans accruing interest at 10% plus! Paying off your expensive cards and loans should be your number one priority - just think about how pleased you'd be if you had no debt!
And anything left over could go into one of the following options:
2. Put It In Your Pension
Yes, the boring option - you don't want to wait until you're 65 to see it again. But there can be big advantages of using your pension allowance are huge.
If you were to put that £5,000 into your pension, as a basic rate tax payer you would automatically get an extra £1,410 from the tax man. So your windfall is now worth £6,410. You'd get even more if you pay higher rate tax, as you get a refund from the tax man worth an additional £900.
If you are a member of a company scheme, you can pay an additional voluntary contribution, but first check to make sure these charges aren't too high.
3. Pay Off Your Mortgage
Provided your mortgage lender allows it without penalty, overpaying your mortgage is a great way to use a windfall. By reducing the interest payable you will lessen your term or reduce your monthly payments, and generally achieve a better return than you could by saving it as cash.
4. Save It
If you're likely to need your windfall within the next five years, or you don't have a rainy day account for emergencies already set up, putting your windfall in savings would be the most sensible. There are some good rates of interest available (check out our Savings centre for accounts paying 5%+), but for tax-free returns remember you can save up to £3,000 a year in a mini cash ISA.
5. Invest It
Provided you can leave your money along for at least five years, the stock market could be the way to go for better returns than a savings account. That doesn't have to mean buying and selling of shares - there are less scary methods, such as using an investment trust or an index tracker. These are simpler ways to invest in the stock market, with lower charges than most other forms of investments.
If you haven't already taken out an ISA this year, you could open a maxi share ISA with your £5,000, and you'd still be able to add up to £2,000 until April 5 if you wished. And if you have taken a mini cash ISA already, remember you can still take out a mini share ISA with up to £3,000. Have a look in our ISA centre to find out more.
Deciding what to do with a lump sum is a difficult decision, but if you can forgo the idea of blowing it all on a spending spree, you may find it satisfying to make that windfall even bigger!
Above tips by Motley Fool.
Or you could SET UP YOUR OWN BUSINESS!
Posted by Mark at 08:00 PM | Comments (0)
January 01, 2005
| Personal Savings |
By William Kay - The Independent
New research from Alliance & Leicester Personal Loans reveals that reducing and paying off debts is a priority for half the UK population this year, closely followed by increasing savings.
Moore Stephens, the accountancy group, said that people should review their financial commitments to ensure they provide best value and pay the least tax.
Keep proper, organised records of your income and expenses, so that you can complete your tax returns and answer Inland Revenue questions easily.
If your spouse pays tax at a lower rate than you do, consider transferring income-yielding assets such as shares or unit trusts to them so that the income is taxed at the lower rate, if at all.
If you are planning to cash an insurance bond, and your spouse pays tax at a lower rate than you do, assign the bond to your spouse beforehand, so that tax suffered on any gain in value will be reduced or possibly even negated.
The same principle applies to investments that are showing a capital gain. Make use of your spouse's annual capital gains tax exemption, by transferring the assets to your spouse before they are sold. Even if both of you have used up your annual exemptions, a transfer can still prove worthwhile if your spouse pays tax at a lower rate.
Taxpayers who have made charitable donations, or are planning to do so, should ask the charity for a gift-aid form so that it can claim 28p for every £1 that you give. Higher-rate taxpayers should keep a copy of the form to claim the higher rate. Gifts made by the end of this month can be put in the 2003-4 tax return.
If you have given your children Christmas money to save, keep it in a separate bank account, away from money that they have received from grandparents, uncles, aunts or friends. You will be taxed on any income of more than £100 that their savings generate from what you give them. But they can then take full advantage of their personal income tax allowance of £4,615 on gifts from elsewhere. You should fill in Inland Revenue form R85 to tell banks or building societies not to deduct tax.
Your children also have their own capital gains tax annual exemption of £8,200 for the 2004-05 tax year, wherever the money comes from.
If your children are likely to start university this year, ask them how they or you are going to pay for it.
Although the pension rules will not change until April 2006, it is not too early to be thinking about how to take best advantage of the new regime. This will set a lifetime limit on an individual's pension pot, starting at £1.5m, and a person can put the equivalent of his or her entire annual salary into that pot. It will all attract tax relief, but remember that you cannot touch it until you reach retirement age.
Posted by Mark at 11:13 AM | Comments (0)
December 13, 2004
| Foreign Exchange |
The Universal Currency Converter®, the world's most popular currency tool, allows you to perform interactive foreign exchange rate calculations on the Internet, using live, up-to-the-minute currency rates.
Posted by Mark at 05:25 PM | Comments (0)