What should a young person do with an inheritance or lottery win?

Let us now turn to wealth held by a few younger people. Let’s consider the limited number of cases of someone who comes into a substantial sum by inheritance, or gift from a rich relative, or from a lottery win or some such. I am not going to consider in this article the profits of successful entrepreneurship by the young person.

Let’s say they receive £500,000. Let’s suppose they have no professional qualifications but did get a first degree in humanities or were educated to A level and now have an office job. Should they

Buy a good quality home with all the money?

Buy a home with part of the money and do something else with the rest?

Should they invest some or all of the cash in developing their own business?

Should they invest the money in shares and build a portfolio? Should they put some of the money into a pension fund?

Should they spend some of the money on training/education?

Tax may play a role in the decision. Putting as much money as possible into an ISA for share investing would provide freedom from income tax and CGT on the investment. Putting money into a pension fund also offers full tax shelter, but it locks the money up for years and a future government might change the rules against you before you can reclaim the cash. Investing in your own business can get you entrepreneurs relief from CGT. Buying a home exposes you to Stamp Duty but frees you from CGT.

The way to increase the young person’s financial position the most would probably be to invest in a successful business for themselves. Given the risks what do you think would be the best course of action? How big a distortion is tax? What kind of a society do we want to be – more lawyers, more landlords or more entrepreneurs? Part of the purpose of these articles is as background to the budget, which presents a good opportunity to change the UK tax system in ways which reward effort, enterprise and saving, and drive faster growth as a result.

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90 Comments

  1. Posted September 4, 2019 at 5:19 am | Permalink

    Good morning

    Difficult one as it all depends on the individual. But buying a modest home would be a good start. They could always, through hard work and sound investment buy a better one later in life.

    Punitive tax laws make it difficult to invest. Why take the risk when government demands from you the majority of the rewards ? Where is the incentive ?

    Governments and politicians want to be seen as caring when in fact we need them to be effective with only a light touch on regulation.

    Less is more.

    • Posted September 20, 2019 at 6:07 am | Permalink

      Indeed we need far less tax, simpler taxes, far fewer regulations, far less government, competitive banking, cheap on demand energy, far fewer worthless degrees and less student debt, less crony capitalism, more individual freedom and choice, fracking and much relaxed planning and employment laws.

      But we seem always to get the opposite even from the so called Conservatives.

      • Posted September 20, 2019 at 12:23 pm | Permalink

        @Lifelogic,

        Too much deregulation and we will end up with corruption and oligarchs (or something on the road to).

        Regulation / commercial law can be a pain but it’s necessary in a sophisticated, modern economy, especially if we want to create an economy that is based on high tech / digital (goods and services) leading to higher productivity, higher quality exports (from one UK region to another and abroad), and patriotism in British Business and confidence in the British economy – long-term.

        Eventually leading to lower taxes! (But taxes can ultimately only be radically lowered by restoring a sense of British Work Ethic – the kind of work ethic that inspired the Quakers to be so successful in business in every sense).

        • Posted September 20, 2019 at 4:06 pm | Permalink

          Ed, I disagree. A surfeit of rules and regulations leads to corruption. I suspect there is a “Laffer curve” for legislation – not enough (and/or not sensible) legislation leaves the innocent and the weak unprotected from the unscrupulous – too much and it becomes difficult to obtain or navigate justice, loopholes get exploited, and the cost becomes prohibitive, all leading to corruption.

          • Posted September 20, 2019 at 7:58 pm | Permalink

            Nick, I agree. But just trying to balance the emphasis of Lifelogic’s argument which is more of a table thump than a slap.

          • Posted September 20, 2019 at 8:05 pm | Permalink

            Also, I’m sorry but a lot of Lifelogic’s economic arguments are too 1980’s for me (which was very much capitalism reacting to the socialism of the 1970’s. I understand why people reacted like that in the 80’s but we are now 2019. We need to develop our economy through crafty, right-wing investment in the high-tech / digital industry. The 80’s was very focused on The City, shareholders and making a quick buck. To put it crudely. I’m a big supporter of the City but at same time, we’re too dependent on it and the how it can lead to a casino-style economy. Money is important as an incentive but people always want job satisfaction. People want to be involved in making high quality British tech and digital products and related services, the high quality skills they involved, the high quality exports involved both nationally and internationally, and so on. Things that lead to increase in productivity and general job satisfaction instead of the country being so focused on seeing numbers whizz across screens (important as that is). And the brain drain to the City …

          • Posted September 20, 2019 at 8:13 pm | Permalink

            Lastly, Nick, an economy based more on British high tech / digital good and services leads to more patriotism in our economy (something important to the Germans in particular) where people feel some genuine loyalty to the British company they’re part of (because it creates quality high quality British high and tech and digital good and services).

            Patriotism works in the economy to a certain degree. Look at the Germans!

            And we should have and can create, in the right ways, patriotism in every area of British life – whether the economy, arts, whatever.

            Ironically, if we’d focused on this high tech / digital model more and earlier, we’d be out of the EU by now because people wouldn’t be so worried about the transition period of leaving the EU to going global (a transition that will take 10+ years, but if we had a stronger economy then this transition period would be less powerful and a shorter duration).

        • Posted September 20, 2019 at 8:22 pm | Permalink

          @Lifelogic,

          Apologies, no disrespect by my ‘198o’s comment .. but at same time I want my nieces and nephew to have a great future and I want them to live in a strong British economy based on high tech / digital and all opportunities that will afford them including being able to buy a house and so on. I think we really need to revamp our economy more in this direction and that more in The Conservative Party support this.

      • Posted September 21, 2019 at 5:08 am | Permalink

        Of course someone with a lottery win is by definition a bit daft as they were silly enough to buy a ticket (lest it was given to them). Perhaps best if they do not start their own business, at least before they study some maths, risk/reward, business and probability. The best way to start a business is so often to get a job in that sector first and learn at someone else’s expense.

    • Posted September 20, 2019 at 7:38 am | Permalink

      Spot on. The most important thing is for people to understand their risk reward/appetite I guess informed by upbringing/education etc. Running a business is excruciatingly difficult with a blizzard of government regs, to deal with especially employment law. Large businesses can cope with both the in-house expertise and ability to absorb staff absence but at lower SME level, that’s a nightmare.

      In my experience tax was never a distortion nor a much discussed subject. If you don’t earn you don’t have to pay it, almost all businesses set up to pay as little tax as possible, evade and avoid. Certainly the major influence on an investment decision should never be tax. That is a bonus or the way to structure it.

      One thread of the umpteen businesses I have worked with is that owner managers do not have the broad knowledge to make them work, particularly around financial management defaulting to unnecessary costly accountants.

      Certainly education towards the latter states should have a big focus entrepreneurship. At 13/14 pupils are beginning to be offered pathways but this never features.

      Invest in house first, start a self administered pension fund/put into employers scene etc as much as can be afforded, take all the education opportunities that employer offers, MBA etc and watch and wait. If you like ‘safe’ stay put but don’t complain. Excitement/opportunity look to branch out. Have a gap year/travel.

      Are universities entrepreneurial enough supporting roll outs of the technologies etc their students have come up with, with government setting up support clusters/hubs around their mentoring, not much of the poor lick of paint stuff on offer at present, subsidised office/workshop accommodation?

      I suspect not.

  2. Posted September 4, 2019 at 5:25 am | Permalink

    They should move to new Zealand or Canada, and not look back

    • Posted September 20, 2019 at 6:08 am | Permalink

      Monaco (or perhaps Sark) if they have only £500k.

    • Posted September 20, 2019 at 6:44 am | Permalink

      Why not to one of the many civilised, cultured, interesting, historic countries on the Continent, within easy reach of the many others?

      • Posted September 20, 2019 at 3:17 pm | Permalink

        Marty

        No too much rioting and water cannons across the pond

      • Posted September 20, 2019 at 3:51 pm | Permalink

        martin…..err civilised (not many) cultured ( down to about 5) interesting ( down to about 2) historic ( now a real struggle) within easy reach of others…?
        You’ll have to suggest some, it beats me.

      • Posted September 20, 2019 at 4:11 pm | Permalink

        Martin, Hadn’t you heard? – civilised, cultured, interesting, historic countries are so yesterday, and are to be replaced by empires. The continent under the sway of your EU ideology is one of the last places I would suggest a young person goes.

    • Posted September 20, 2019 at 9:28 am | Permalink

      My thought exactly. With a left wing Conservative government and a Marxist waiting to take over, anywhere besides the UK looks attractive.

    • Posted September 20, 2019 at 12:01 pm | Permalink

      Foreigners can no longer buy houses in New Zealand

    • Posted September 20, 2019 at 12:29 pm | Permalink

      The UK has the best city in the world (London), beautiful countryside (i.e. Cornwall, great arts, football and, above all, cheerful, good-humoured people, and much, much more.

      Why would anyone want to go to New Zealand or Canada? Come on ..

      Sure there are many battles to be fought to forge our country what it can be (every generation and individual has to play their part – it doesn’t just happen by its own) – but I encourage people to stay behind and fight those battles – let the sparks fly!

    • Posted September 20, 2019 at 4:40 pm | Permalink

      Iain Gill

      “They should move to new Zealand or Canada, and not look back”

      The two most boring countries in the world. New Zealand reminds me of 1930’s Scotland.

      So do most of the Channel Islands. What good or interesting things ever came from there?

      The only civilised countries to live in are mainland Europe. As the saying goes: All roads lead to Rome (or Vienna – the world’s most livable city for the 10th year running)

      • Posted September 20, 2019 at 9:41 pm | Permalink

        Is there a country you do like Margaret?

  3. Posted September 4, 2019 at 5:25 am | Permalink

    Don’t change the subject ! No-one cares what this non existent person does. The government lost but Boris has won in that he can now “purge” the Conservative Party of conservatives and go to the country.
    He will win easily due to Corbyn`s extreme and worsening unpopularity equivocation on Brexit but on a historically low vote. If Farrage pulls out, he will win by more.
    Here is the problem. The country has now clearly decided the UK should stay in the EU having seen the reality. All Polls show this and have done since Jan 2017
    Parties favouring a referendum allowing the country to say so will get more votes.
    But in our crazy fptp system, not designed for three dimensional politics we will all be dragged out of Europe .

    The young person should hire a plane to write across the sky
    ” THE CONSTITUTION DOES NOT WORK” until the money ran out

    ..or emigrate

    • Posted September 21, 2019 at 7:57 pm | Permalink

      Farage is not going to pull out. After the Conservative reaction to his offer to organise which seats to challenge, he is going to enjoy watching many take a drubbing in the next GE. Ignore at your peril.

  4. Posted September 4, 2019 at 5:28 am | Permalink

    Suggest that the conservatives do a deal with the Brexit party.

    • Posted September 20, 2019 at 5:29 am | Permalink

      Not easy to decide as the government keep moving the goal posts on taxation of property, pensions funds, investments and the like. We might even have Corbyn taking taxes even higher than the current highest taxes for 40 years that Osborne and Hammond gave us.

      My investments over about 40 years have tended to return over 10% even after inflation and taxes (using sensible tax planning and now living outside the UK). In a tax free environment £500k at 10% for 40 years would give about £ 22 million if taxed at 45% each year it would only grow to about £4 million under 1/5. Then in the UK you might have IHT and Corbyn to worry about. So tax is very, very important move to a low tax country or use EIS, pension tax breaks and similar if you must stay in the UK. On an average income (as a humanities graduate) you might earn only about £800k after tax and NI over a lifetime of work. So £500k is a very significant boost to this. Use it well.

      • Posted September 20, 2019 at 5:46 am | Permalink

        Do not buy a property to let out in the UK (or mainly UK investments) until it is very clear that Corbyn/Mc Donnall/SNP is not going to get anywhere near to power (Tax to death Hammond was quite bad enough) This despite May and the 21+ “Conservative” Traitors best efforts to bringing a Corbyn Government about.

        Buy a house he/she can live in while building another one or two in the garden perhaps if the numbers work perhaps (once the dire Corbyn risk has gone). Do so in an area on the up (perhaps due to transport improvements or other local factors) so property demand is likely to exceeds supply in that area by the time it is finished. Find good and honest planning/property development advisors.

        Great to see the dire lefty and….. Justin Trudeau hoisted by his own absurd petard! What a lot of absurd drivel on the BBC about it.

        • Posted September 20, 2019 at 5:59 am | Permalink

          If unattached perhaps they could use some of the money to move in the right circles where one can meet/marry someone richer and or brighter than he/she is perhaps? Preferably someone with a numerate non humanities degree or inclination unless they are very rich!

          100,000 children leaving school without basic qualifications it seems. We have a dire state near monopoly in education as well as in health care. Freedom and choice for all please. Perhaps even learning on how to do this and present yourself to best advantage in these circles.

          • Posted September 20, 2019 at 6:01 am | Permalink

            Yes Mc Donnall want to destroy Eton and all private education which would cost the government a fortune.

    • Posted September 20, 2019 at 6:02 am | Permalink

      They must come to some accommodation and must never take the 21 traitors back in.

  5. Posted September 4, 2019 at 5:32 am | Permalink

    “Let’s say they receive £500,000. Let’s suppose they have no professional qualifications but did get a first degree in humanities or were educated to A level and now have an office job”

    1. They should blow the lot on a round the world luxury cruise. No tax issues then arise.
    2. They should enter politics knowing that they can screw the system and live the life of luxury at the expense of taxpayers for the rest of their lives.

    Sorry, Sir John,

    I am rather cynical at the moment. I am hoping I may feel better in a few days time.

  6. Posted September 4, 2019 at 5:34 am | Permalink

    No, no, there’s no elephant in the room this Autumnal morning…

    • Posted September 20, 2019 at 6:20 am | Permalink

      I suspect the supreme court will come to the wrong (get Boris) decision. Judges are a subset of lawyers who are nearly all pro remain (almost as much pro remain as the appalling BBC). Judges also tend to have a taste for power and think they know best, despite their rather limited experience of real life.

      I very much hope I am wrong, we do not want even more enemies of the people. It would be a huge mistake by them and profoundly damaging to the UK and UK democracy.

      • Posted September 20, 2019 at 3:22 pm | Permalink

        The patience of the British public is wearing thin. Davey was openly mocked on QT last night & Cherry/Maugham were badly heckled outside the Supreme Court. If Boris screws up Brexit then things could escalate quite quickly in my opinion.

  7. Posted September 4, 2019 at 5:39 am | Permalink

    Any young person who has a large cash windfall should immediately EMIGRATE to an independent and democratic country.

    – Sir John with respect – after yesterday’s shenanigans I don’t think people will want to talk about what to do with a lottery win, although I have offered my ideas.

    The people voted in 2016 to take back control from the EU, now Parliament is voting to give even more control to the EU over our future. What the hell is happening in Westminster ?

    I was elated when Boris expelled the EU’s quislings from the Tory party. At last a PM with some backbone.
    The ‘impartial’ speaker should be next for removal.

    So we have a Government that can’t govern and a Parliament that doesn’t want a GE, because the remainers know they will get hammered, so pray tell what exactly is the purpose of the HoC ?

    It will soon be the 5th November. A light anyone ?

  8. Posted September 20, 2019 at 5:54 am | Permalink

    Do not be naive enough to think that government acts in good faith either for the individual or the country, they do not. Would you trust your future to the bunch of chancers who currently occupy Parliament, absolutely not.

    The half million you cite is not a game changer, so a decent home is a good bet, but remember you also need to be able to financially run it. If single, moving out might be a sensible option to anywhere where your enterprise and work ethic is not going to be predated upon. My estimate is that you need a minimum of at least ten million to break out so do not get carried away at a tenth of this.

  9. Posted September 20, 2019 at 5:59 am | Permalink

    Any tax paid to Labour’s client state simply strengthens Labour’s grip over our lives. Take transaction decisions that minimise or eliminate tax payments to a political state that works against your interests

    The more tax you pay the stronger Labour becomes even when they’re in opposition

    Therefore use the money to guarantee self-reliance and separation from Labour’s client state and their ability influence your life

  10. Posted September 20, 2019 at 6:07 am | Permalink

    Get out of the UK and Europe asap.

  11. Posted September 20, 2019 at 6:08 am | Permalink

    They should do what they feel comfortable doing, its their money, so their choice.

  12. Posted September 20, 2019 at 6:34 am | Permalink

    I doubt the tax regime can be materially influential in this circumstance as too much depends upon the individual’s attitudes and ambitions.

    Better fostering entrepreneurship requires cultural change.

  13. Posted September 20, 2019 at 6:37 am | Permalink

    If they value their freedom – they should emigrate.

    Their are many places outside the clutches of the Evil Empire that value democracy and the rule of law.

  14. Posted September 20, 2019 at 6:42 am | Permalink

    The distortion in Tax, inhibits growth in the UK.

    In terms of an enterprising business pro-rata small business subsidies larger entities due to unfair and unreasonable tax bias.

    Just as with Government the establishment fights to keep what could be the opposition out.

  15. Posted September 20, 2019 at 6:51 am | Permalink

    I would advise if they won the lottery, to leave the country and head to one that is not in the EU and make a life there.

    Depending on the size of the inheritance, if modest, I would advise they get a transferable skill i.e. engineering or nursing etc and apply for emigration into a country outside the EU.

  16. Posted September 20, 2019 at 7:02 am | Permalink

    Emigrate.

    Failing that retrain as a plumber, declare as little as possible for tax, buy a nice house and invest any left over in the stock market on a nice spread of ‘safe’ bets.

    • Posted September 20, 2019 at 8:42 am | Permalink

      If they are a socialist or greenist they should give all the money to the state.

  17. Posted September 20, 2019 at 7:19 am | Permalink

    Starting a business from scratch isn’t easy, as I know from direct experience. You need to be a jack of all trades to cope with all the legal requirements, and dealing with employees, as well as being exceptionally good at your chosen career or profession. You need to be very determined to cut your own path and not be deterred by the many setbacks you will encounter. Starting a business is much harder work than being employed and you take all the risks, both financial and mental, but you reap the rewards of your own efforts later on when the business ‘takes off’.

    Someone with money to spare could pay someone to manage many aspects, but then they would never learn the full aspects of the business as happens when you start as a one-man band and grow from there.

    The idle and the people who need safety and security above all else need not apply. It is a risk, but a very rewarding risk when it goes well.

    I have often compared this to Leavers and Remainers. Leavers are the optimistic adventurers who will work hard to achieve what they want. Remainers prefer no change and ‘safety’ and are pessimists, overall.

  18. Posted September 20, 2019 at 7:29 am | Permalink

    A gift of 10 percent to a carefully-chosen charity would be a good start.

    • Posted September 21, 2019 at 4:52 am | Permalink

      Well do you think the charity will use the money better that he/she will? I am often appalled by very many of the things that so called “charities” do, by their high overheads and overpaid senior staff and by the ratios of overheads to good works. Many are just unfairly advantaged businesses.

  19. Posted September 20, 2019 at 7:39 am | Permalink

    Any decision they make is vulnerable to sudden, arbitrary tax changes. Witness, Brown’s tax on dividends earned in pension funds (effectively killing off final salary schemes); limits set on the amount that can be set aside in a private pension (causing an exodus of doctors from the NHS); changes to the terms and costs of employing people.

    Advice needs to be adapted to the young person. Further training and education and a roof over one’s head are basic. The investing route depends on whether or not they have good ideas they can develop into a business. This will be as much a matter of time as of money. A cash cushion will help them survive the difficult early years when business survival is on a knife edge. A tax regime that seeks to encourage this route needs to be a light touch regime bounded perhaps by scale (£000s), time (years it is available) and age of the entrepreneur (up to 30?). Some will game any system that is devised but that is inherent in any tax system.

    An ISA makes sense but will only absorb £20k per year. My advice would be to invest some cash in investment trusts that specialise in smaller companies; these offer, in my opinion, better growth opportunities over time. Some cash should be invested (or parked) in investment trusts that focus on regular dividends. A wide variety of investment trusts is available. Furthermore they are mostly readily marketable when and if they need to be cashed out to support a business venture.

  20. Posted September 20, 2019 at 7:45 am | Permalink

    Take varied advice on investing in the future value of articles like old cars, postage stamps, art, rare earth metal then create a portfolio mix of say 4 to be considered for sale and reinvest at say 5 to 10 year intervals.

    • Posted September 20, 2019 at 3:46 pm | Permalink

      Russian, Chinese and Japanese high end art would be very wise.

  21. Posted September 20, 2019 at 7:48 am | Permalink

    Simple tell the truth it is long overdue.

    A) taxes do not fund government spending

    B) they take spending power away and control inflation

    C) Move skills and real resources the stuff we can run out of to areas of the economy where they are needed

    D) stop concentrations of wealth that then try to corrupt democracy.

    The first rule of brexit tell the truth or be left with a poisoned chalice.

    • Posted September 20, 2019 at 12:24 pm | Permalink

      Derek – Bringing immigration down to the tens of thousands (we don’t care who they are as long as they assimilate, we are not racists) would have stopped Brexit. Bringing immigration down to the tens of thousands is a compromise that could reunite our country still – but Remain don’t want compromise.

      The *truth* about Brexit is that we were never meant to have voted for it.

      We voted for it because they “rubbed our noses in it.” And because we voted for it all we’re going to get is our noses rubbed in it.

      Rub rub rub !

      So here comes Corbyn.

      I might even vote for him. It’s done me no good being a good, working class Tory voting boy.

      Abolishing private schools might send a message. Redistributing wealth (and importing poverty to) areas like Beaconsfield and Lewes might send a message too.

      You’re about to find out what a country is like when all those clever students get to vote for everything and the ‘thick’ working class give up on it altogether.

  22. Posted September 20, 2019 at 7:56 am | Permalink

    I think the focus should be more on clever government investment in the high tech industry than tax – to help British entrepreneurs and British companies go global in this industry and related industries.
    Increase in high tech industry – goods and services – means feal increase in productivity and higher quality exports and more sense of patriotism in our British companies and confidence in our economy – long-term.

    • Posted September 21, 2019 at 12:24 am | Permalink

      Rather than investing, they’d have to do something about certain laws that have hit the digital sectors rather hard, starting with EU Digital VAT (our US competitors just don’t pay it as their government refused to enforce it) and Article 11&13. They’d also need to straighten out the mess the UK banking system has made around cryptocurrency (Barclays, for example, says that not only must a business not accept cryptocurrency but none of its clients can either, which rules out British firms working with, for example, the Red Cross who take crypto donations).

      The tax review announced by Sajid Javid may do a great deal to return skilled workers to the UK, especially as he seems to have extended it to review the issues with IR35.

  23. Posted September 20, 2019 at 8:20 am | Permalink

    For the next five years, invest in managed funds that earn income in foreign currencies. Nobody knows where Sterling FX will go post-Brexit.

    • Posted September 20, 2019 at 3:21 pm | Permalink

      acorn

      That implies you know where other currencies will go “post Brexit” interesting, let me have next weeks lottery numbers will you

      By the way you might want to rethink the fatal flaw in you “financial advice” too

    • Posted September 20, 2019 at 4:21 pm | Permalink

      Acorn, No one could know where Sterling FX would have gone post-Remain either.

  24. Posted September 20, 2019 at 8:41 am | Permalink

    Obviously the immediate main consideration for such a person should be how to hang onto their money in the event of a Marxist inspired govt under Corbyn / McDonnell. Even if it’s only a 10% chance, that’s still very high for what will be a wipe out event. This threat is already driving people out of the UK. There are advanced plans by many non-UK rich and highly paid individuals to get out should it look likely we will get such a govt. Every time Labour propose another policy of arbitrary confiscation from people they don’t like (private schools being the latest), this conclusion is reinforced.

    Once we have resolved brexit one way or the other and lifted the threat of a Venezuela style disaster the answer would be a combination of property and equities. A young person in this situation starting a business would be unwise to put his or her whole wealth into that.

  25. Posted September 20, 2019 at 8:48 am | Permalink

    What is ‘sensible’ for one kind of personality is entirely wrong for another. To set up your own business requires quite a high tolerance of risk, for instance. Investing in something that is absolutely rock-solid safe and ethical….as a lucky survivor of the Equitable Life fiasco, I would ask what is ‘safe’?

  26. Posted September 20, 2019 at 9:14 am | Permalink

    It depends on the person’s parents. If coming from a rich background they would inevitably get the money into an off-shore tax haven. Panama seems a nice safe place to hide money.

  27. Posted September 20, 2019 at 9:16 am | Permalink

    When you say that this is a “limited number of cases”, you’re not wrong! The number of young people with this amount of wealth is astronomically small.

    Your hypothetical scenarios about millionaire pensioners and people in their 20’s with 500k are all well and good, but I would be much more interested in reading your thoughts about the financial situation of average people.

    • Posted September 20, 2019 at 6:38 pm | Permalink

      +1

  28. Posted September 20, 2019 at 9:42 am | Permalink

    imho we need to reduce the amount of artificial jobs and have an environment that encourages DOING and CREATIVE work.

    Lawyers, bankers, accountants, civil servants, regulators etc etc spend too much time shuffling papers in order to comply with our heavy statute book.

    Too many companies and shareholders are watching the latest regulations, budget or Fed press release rather than concentrating on improving their own product or service.

    We need to reduce and simplify regulations, freeing up more people to do things that will benefit our economy and society.

    I hope the next budget will send us into this direction.

  29. Posted September 20, 2019 at 9:48 am | Permalink

    “Let’s say they receive £500,000.”

    If that were an inheritance based on the single NRB the govt would take £70,000 to pay off some of the interest on the money it borrowed to fund overseas aid donations.

    Assuming that the person used the remainder to buy a property the govt would then take another £11,000 from them.

  30. Posted September 20, 2019 at 10:47 am | Permalink

    Buy a property

    Any money left its now pointless investing in pensions etc as we can no longer trust the government not to arbitrarily change the rules

    • Posted September 20, 2019 at 4:24 pm | Permalink

      Libertarian, I suspect Corbyn is likely to nationalise land too, including the putative young person’s garden.

  31. Posted September 20, 2019 at 10:50 am | Permalink

    You can’t answer the questions directly without knowing the young persons academic, technical or physical skill set, their likes and dislikes, whether they are a hard worker and like to be busy or lazy and wants to do as little as possible with their life like the off-grid man and his partner in the new Stacey Dooley program.

    Homes, where I’m from, aren’t the investment vehicle they are to Southerners, however, being able to live mortgage and rent-free gives a person freedoms but Council tax needs to be considered because if you live in a high-cost property (band G around £300,000 and above) in Labour local council area your home rates will be high. Tax changes should be fair though “If you’re married and jointly buying a property, then you both need to be eligible first-time buyers to get First-Time Buyers Stamp Duty relief”. The first time buyer should get stamp duty relief on their share of the home, they can if they buy a shared home!

  32. Posted September 20, 2019 at 11:04 am | Permalink

    If I was young with 500K I’d get some smart tax lawyer to hide it away offshore where Johnny Government of any description cannot get their hands on it.

    The PC liberal media has made being wealthy (earned or inherited) a criminal offence. Therefore anyone who keeps their assets away from the government or incoming government who may have more draconian plans, should be applauded.

  33. Posted September 20, 2019 at 11:11 am | Permalink

    As a recently retired Independent Financial Adviser I feel qualified to comment here.

    Firstly, what the person does with the windfall depends entirely on their personal situation :

    Are they in a long term relationship ? If so is the partner working ?
    Do they have any children or do they wish to start a family in 1/2/5/10 years ?
    How far does current income go towards providing sufficient income to meet their personal and housing needs without touching the £500,000 ?
    Can they afford a mortgage ? (If they are currently paying rent the answer will be yes).

    I would prioritise buying a house because this provides security, low costs over the long term and a method of part-funding retirement if necessary via equity release.

    Where he/she or they live, and the answers to the questions above, will very much dictate how much of the £500,000 needs to be spent on buying a house, particularly if they can afford a mortgage.

    As for what decisions should be made on career paths etc, these should be dictated by their personal desires : It is important in the long term to be engaging in an occupation that the person feels comfortable with until reaching their chosen retirement age.

    I am conscious that I am not providing answers here but raising more questions but these are essential to planning the right solution. That is the nature of financial planning.

  34. Posted September 20, 2019 at 11:52 am | Permalink

    I think a young person who was fortunate enough to receive a substantial inheritance or lottery win could do worse than to invest a portion in a UK success story such as offshore wind power generation.

    The UK leads the world in installed wind capacity and today’s announcement by Energy and Clean Growth Minister Kwasi Kwarteng that offshore wind has dominated the third UK Contracts for Difference auction, with 5.5GW of projects securing support starting as low as £39.65 per megawatt-hour – which is below the current price of electricity – and without additional subsidy on bills. All capacity is due online by 2025. BEIS said the outcome will see up to 8000 jobs created in offshore wind. So why did Theresa May agree £95/MWh for the new Hinkley C nuclear plant?

    SSE Renewables and Equinor have secured support at £39.65/MWh, £41.61/MWh and £41.61/MWh for the Dogger Bank Creyke Beck A, Creyke Beck B and Teesside A projects, respectively.

    SSE has meanwhile bagged a CfD of £41.61/MWh for 454MW at its Seagreen 1 project off Scotland.

    Innogy has won with its 1.4GW Sofia project in the Dogger Bank at £39.65/MWh. The 12MW Forthwind demo off Scotland has also secured support at £39.65/MWh.

    As the UK further develops it’s renewables sector, harvesting our abundant resources of free energy, an investment in one of the excellent UK based closed and open ended funds/investment trusts available to the retail investor would provide a good income (c 5% yields) as well as the prospect of capital growth.

    • Posted September 21, 2019 at 5:00 am | Permalink

      It is not a success story at all. It is tax payer subsidised crony capitalism. Providing expensive and intermittent (and therefore worth far less as needing back up) electricity. It does not even save any significant CO2 as the turbines need to be built, installed, maintained and eventually replaced. This all uses large amounts of fossil fuel energy almost as much as the energy they generate over their useful life. It is largely misguided government virtue signalling and essentially a conspiracy against tax and bill payers.

  35. Posted September 20, 2019 at 12:04 pm | Permalink

    Get a good financial adviser. Invest in two or three houses, one to live in and two to rent out being careful to buy houses that need doing up and having them done to improve value. Then set up a business employing people and selling stuff, make the money work for you and others.

    • Posted September 20, 2019 at 1:11 pm | Permalink

      Houses to let has largely been killed by excessive and irrational taxation from Hammon. Taxes on profits you have not even made. Then there is the threat from Corbyn that he will steal it off you.

      • Posted September 20, 2019 at 3:35 pm | Permalink

        Correct Lifelogic – Hammond pandering to the liberal media. A friend is now selling his business i.e. buy to let. All 8 properties are 3/4 bedroom newer homes and let to families. The taxation attacks on this market sector means its no longer viable for him to trade. All the tenants have been offered the chance to buy, but none can afford it. That means 8 families some local authority will have to deal with at some stage. Well done the Hammond & government.

        • Posted September 20, 2019 at 7:47 pm | Permalink

          Good luck wanting to sell 8 homes all ex-let.

      • Posted September 20, 2019 at 4:52 pm | Permalink

        Hammond obviously despises both landlords and tenants and just want to steal money off them and then have the tenants living on the streets one assumes. Taxing profits that have not been made is not sustainable it is just legalised theft in essence. He and the other 20 traitors must never be allowed to stand for the Conservatives again.

  36. Posted September 20, 2019 at 12:11 pm | Permalink

    When almost everything we do is taxed, the tax tail is often wagging the business dog.

    Often we are investing monies that have already been taxed and taxing them again and again while the money is in the hands of the same individual – or taxing ‘growth’ if not the capital (even when that ‘growth’ is below the level of inflation).

    How can a young person guarantee that any investment in a business would be ‘successful’?

    Larger companies have access to tax avoiding measures (such as shifting profits abroad prior to points in time when tax would be due).

    It is fair to say that current taxation measures encourage us to be a nation of people who live for the moment and spend what they earn.

    P.S. There should be provision for taking money out of a pension fund before retirement age, as long as the tax relief is repaid at the rate that would have been due at the point of the investment into the pension. Under the current rules, it is a serious disincentive to pension saving that is is locked away for years. Also, the personal annual contribution limit should be scrapped – why discourage people from catching up later in life?

  37. Posted September 20, 2019 at 12:29 pm | Permalink

    Do the yacht master courses, find a partner, buy a 40footer and sail the world.

  38. Posted September 20, 2019 at 1:19 pm | Permalink

    Iain Gill: “They should move to new Zealand or Canada, and not look back”

    Canada is a ‘no no’, Justin Trudeau once wore ‘black face’! Oh! the ignominy.

  39. Posted September 20, 2019 at 1:32 pm | Permalink

    I respond from a position informed by the adage history never repeats but it does rhyme.
    Property should only ever be purchased to provide a secure roof over your head, so yes by a property but do not rely on it being a profit generation device.
    A quick example of history, in 1948 Aunt Sophia left 14 houses, including 11 in West London, her estate was valued at £7,033 (current equivalent about £180,000. Current value of the properties about £5 million – will that outstripping of inflation repeat, I wouldnt bet my future on it.
    Once accomodation is secured. Secure enough income for basic needs by investing in a managed portfolio of blue chips & bonds
    If the individual has the enthusiasm and apptitude for business then invest an amount you can afford to lose in a business. If they have neither the enthusiasm nor the apptitude avoid all business propositions like the plague as they will be fleeced.
    Never ever let tax considerations be the driving force behind any decision as they cloud the judgement and Governments wil always be laying traps to prey on anyone who makes any serious money, they have to the money that exists is privately owned, to have anything to spend Govenments have to find ways of confiscating private wealth
    Best piece of advice ever given me was “go very very low profile, the Brits hate tall poppys”

  40. Posted September 20, 2019 at 1:35 pm | Permalink

    Dependent upon location, £500K might not buy a “Dream” property. Even if it does can the buyer fund the regular associated costs that go with it? Council Tax, Water, Heating and Lighting and Electrical power, for example. As for a tax free ISA, unless you have most all of that to invest, due to the tax free allowance on investments up to £1000 per annum for those with less than £1000000, they are no longer a consideration. Unless their standard interest rate return of just 1% can better those taxable on offer elsewhere. Unlikely at present.
    The ultra low interest rates have caused many problems for investors, pensioners and Pension Funds alike.
    I would suggest to a young person winning such a life changing sum that they open 6 accounts in 6 different Banks/Building societies and put less than £85K in each in of their best deposit accounts available so that their money is protected in the event of a bank collapse and just sit on it. While it is safe they can consider all the other options over time and not do something in haste.
    No one knows what is around the corner but it seems to be a considered opinion that a financial crash is imminent and the last thing such a winner needs is for his/her cash to crash, along with it.

    • Posted September 20, 2019 at 1:39 pm | Permalink

      Should read “less than £100,000 (@1% )” not £1M.

  41. Posted September 20, 2019 at 2:39 pm | Permalink

    I don’t think that Government should be trying to influence the young person. It’s his/her money and his/her decision. Why do Governments always try to influence behaviour?

  42. Posted September 20, 2019 at 3:45 pm | Permalink

    Invest abroad. You cannot trust that your money is safe from the state in the UK. I have retired with a good amount in my pension (dispite Gordon Brown) and I will have to live to 108 to get the money back that I put in.

  43. Posted September 20, 2019 at 4:45 pm | Permalink

    Try politics. After a few years you’ll emerge a rich man/woman. And get a place in the world’s best retirement home after you lose your seat as an MP and get kicked up into the house of lords.

    • Posted September 20, 2019 at 9:39 pm | Permalink

      Or be promoted to the upper class of golden salaries, perks and pensions on the EU gravy train.

  44. Posted September 20, 2019 at 5:54 pm | Permalink

    Well I think they should just give their lottery win to me, what with my age and experience I could show the young how it’s to be enjoyed. Wouldn’t you agree, Andy ?

  45. Posted September 21, 2019 at 5:01 pm | Permalink

    John

    “Let’s say they receive £500,000. Let’s suppose they have no professional qualifications but did get a first degree in humanities or were educated to A level and now have an office job.”

    You appear to live in a rather rarified environment….the reality in the rest of the country is significantly different (£5,000 would be nearer the mark). No disrespect, but getting to know people outside your Wokingham/Parliament bubble would be helpful to you and the vast majority of low-income families throughout the United Kingdom. “Qu’ils mangent de la brioche”, springs to mind?

    Politicians, in general, are out of touch with the working class…your comment did surprise me?

    Reply I am fully in touch with all income levels but was writing about this small section to expose attitudes towards risk and business.

  46. Posted September 21, 2019 at 5:12 pm | Permalink

    John

    “Let’s say they receive £500,000. Let’s suppose they have no professional qualifications but did get a first degree in humanities or were educated to A level and now have an office job.”

    You appear to live in a rather rarefied environment….the reality in the rest of the country is significantly different (£5,000 would be nearer the mark). No disrespect, but getting to know people outside your Wokingham/Parliament bubble would be helpful to you and the vast majority of low-income families throughout the United Kingdom. “Qu’ils mangent de la brioche”, springs to mind?

    Politicians, in general, are out of touch with the working class…your comment did surprise me?

    Reply I often write about policies for most people who of course do not have this kind of sum. The point of this article was to expose issues about people’s willingness to invest and venture when they do have money.

  47. Posted September 21, 2019 at 10:02 pm | Permalink

    John

    Thank you for your clarification, appreciated.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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