Is it possible to get 7%+ tax free anywhere just now?

sh856531

Hi guys,

Can anyone tell me if its possible to get a 7% return on my savings just now from anywhere.

I don't know much about saving and at the moment my modest sum is in an ISA getting about 6.25%

I've heard a few people mention bonds offering 7%+ but I don't know much about them and whether they are safe.

I'd be willing to forego instant access if it were possible to get a better rate but I don't know if I'm just being unrealistic.

Thanks to anyone who can advise

Best Regards

Simon

Mikeyorks

If you pay tax you're getting 7.8% gross equivalent in your ISA at the moment. You can switch it to somewhere like Anglo Irish in a 12 month fixed term deposit (often incorrectly called a Bond) at 7.05% gross.

But that only benefits you if you don't pay tax - and aren't likely to in the foreseeable. If you pay tax - you're effectively reducing the interest to 5.64% by making the jump.

sh856531

Hi Mikey

Thanks for your reply.

When you say I'm getting the equivelent of 7.8% on my 6.25% ISA I'm not sure I follow. I understand that I'm not paying tax on my savings but I thought all that really meant was that my return wasn't being reduced to an equivelant rate of about 5% or so.

Could you explain the 7.8% figure for me?

Thanks again

Simon

Mikeyorks

Sure. Your ISA is tax free. To get the equivalent 6.25% on a taxable account you would need to be receiving 7.8% (7.8 x .80 = 6.25) to take account of the 20p / per £1 that would be deducted.

So - if you are a taxpayer you would need to move the money to an account earning at least 7.8% ...... to do as well as your ISA is benefitting you.

If you're not a taxpayer - and that situation will continue for a year or so - then moving the money to any account paying more than 6.25% will benefit you. And there are a number of 'term deposits' around paying 7%+ (gross) (Halifax fixed rate Websaver / Anglo Irish etc)

sh856531

Hi Mike

Thanks for that.

I had a look at the Halifax account you mentioned. Am I right in thinking that you have to pay tax on those sorts of accounts? Are there any accounts where you don't have to pay tax (e.g. ISAs or whatever) where you can get a true 7%+ on your investment/savings?

I'm getting the impression that really 6.5% or so is about the limit that you can get on tax free savings but I just wanted to make sure I'm not missing something

Thanks again for your help

Simon

Baldur

sh856531 wrote: »

I had a look at the Halifax account you mentioned. Am I right in thinking that you have to pay tax on those sorts of accounts?

Yes, you are correct. See HERE - 7% equates to 5.46% after tax at the standard rate on the 3 month account.

Are there any accounts where you don't have to pay tax (e.g. ISAs or whatever) where you can get a true 7%+ on your investment/savings?

It is currently possible to obtain in excess of 7% tax free with the Natwest Cash ISA offering, but only if you have already amassed previous tax years' funds of £18,000+ and transfer them into the product - http://www.natwest.com/personal/savings/g2/isas/cash-isa.ashx#tabs=section4

Current savings rates Including bonus


Balance AER(variable) Gross Rate Net Rate
£27,000+ 7.32% 7.13% N/A
£18,000 - £26,999 7.16% 6.98% N/A

sh856531

It is currently possible to obtain in excess of 7% tax free with the Natwest Cash ISA offering, but only if you have already amassed previous tax years' funds of £18,000+ and transfer them into the product - http://www.natwest.com/personal/savi...#tabs=section4

Crikey - thats quite good. Sadly I only have about 5K just now...

:-(

Baldur

sh856531 wrote: »

Crikey - thats quite good. Sadly I only have about 5K just now...

£5,000 transferred in from previous tax years' Cash ISAs with other providers would still give you 6.67% AER at the current variable rate with bonus.

apt

If Natwest stick at over 7% that would be good for me as that's where my variable rate/easy access ISA savings are. The rest is fixed-rate for 1-4 years with Nationwide, Newcastle BS and Halifax at 6.15-6.5%. But Natwest are bound to lop off 0.5% fairly soon with more cuts to come. If you don't mind tying up your money it's probably better to accept a 6.25% ISA as long as it's a fixed rate. 7% tax-free and virtually risk-free isn't realistic in current circumstances.

sh856531

Ok thanks guys

I'll have to settle for my 6.5%

:-)

Mikeyorks

sh856531 wrote: »

Am I right in thinking that you have to pay tax on those sorts of accounts?

As earlier replies - yes they're taxable. Hence why I said you needed 7.8% to effectively get the same return, as on your current ISA, on a taxable account.

But that assumes you're a taxpayer - which you haven't said?

You can do better - and tax free ('ish) - if you use your Capital Gains allowance. But that means investing - as opposed to saving - and it's a mite risky at the moment (although saving has also had it's moments!). I put £7200 into my wife's ISA in the form of funds just a few weeks ago when I judged the financial markets were at least close to bottoming out! Several of the funds are 35%+ down ....... so I won't give you any advice in that direction!

If you pay at least 20% tax - stick with an ISA. If you don't pay tax and are unlikely to in the minimum next 12 months ...... consider one of the term deposits at 7%+