If you’ve suddenly got a six‑figure windfall or are planning to sell a property, the first thing you’ll wonder is what to do with that large sum. It’s tempting to splurge, but a quick plan can save you stress and tax headaches later. Below are the basics you need to sort out before you make any big moves.
Start with a place that keeps your money safe and easily accessible. A high‑interest savings account or a fixed‑term Certificate of Deposit (CD) can lock in a decent rate without risking your principal. In the UK, some banks offer 7% interest on special accounts, but read the fine print – often you need to lock the money for a year or meet a minimum balance.
If you want tax‑free growth, look at an ISA. Cash ISAs protect your money from income tax, while Stocks & Shares ISAs let you invest in the market without paying capital gains tax on gains. The annual allowance is £20,000 for the 2025/26 tax year, so you can split the sum across both types to balance safety and growth.
For ultra‑cautious folks, a short‑term government bond or a “fixed rate savings” product from a reputable broker can provide a predictable return. These usually have lower yields than the best high‑interest accounts, but they’re backed by the government, which reduces risk.
Once you have a safety net (about six months of living expenses), think about making your money work harder. A diversified portfolio is the simplest way to protect against big swings while chasing growth. The 70/30 strategy – 70% stocks, 30% bonds – is a popular balance for many investors. It offers the upside of equities with the stability of fixed income.
If you’re comfortable with a bit more risk, consider a Lifetime ISA (LISA) if the money is earmarked for a first home or retirement. The government adds a 25% bonus on contributions up to £4,000 each year, which can boost a large sum quickly.
Another option is equity release if you’re over 55 and own a home. While it’s not suitable for everyone, a lifetime mortgage can free up a sizeable cash amount without monthly repayments. Compare brokers, lenders, and banks to get the best deal, and make sure you understand the fees.
Don’t forget debt reduction. If you carry high‑interest credit‑card balances, paying those off first can give you a guaranteed return equal to the interest you’d otherwise pay. The 20% credit‑card rule is a handy benchmark – keep balances under 20% of your limit to protect your credit score and save on interest.
Finally, keep an eye on your tax situation. Large capital gains, interest income, or rental earnings can push you into higher tax brackets. Using tax‑efficient vehicles like ISAs, pension contributions, or charitable donations can offset some of that bite.
Bottom line: protect a portion in a safe, liquid account, allocate the rest into a diversified mix that matches your risk tolerance, and always factor in tax and debt considerations. By following these steps, you’ll make sure that your large sum works for you, not the other way around.
Choosing the right account for a large sum of money can greatly impact your financial health. Whether it's ensuring flexibility, maximizing returns, or protecting your wealth, there are options to fit different needs. This guide explores the best types of accounts to consider when you're ready to securely park your cash. Read about benefits, drawbacks, and find out which choice could work best for your situation.
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