20K - highest interest account?

aliyah

i wonder if anybody could advise about the best place to save.

we have 20K in an A & L online saver 1 account, and wish to add 1K per month to this until december 2006, when we will then pay a lump off our mortgage as our 2 year fixed rate will be up then.

are we better off saving this elsewhere for a higher return?? i would like to know i could get access to the account if needed before that time.

any advice greatly appreciated.

thanks

grumbler

aliyah wrote:

...are we better off saving this elsewhere for a higher return??

Yes, if net interest rate on savings is higher than your mortgage interest rate.
When asking such question it is worth posting whether you are taxpayer(s) and information on your mortgage rate ...

aliyah

thanks grumbler,

i didnt explain that very well - our mortgage is fixed for 2 years with RBS and we cant pay any extra on top other than the monthly set mortgage payments, until the 2 years is up in dec 06.

my husband pays tax. i dont at present.

we want to save as much as possible to reduce the mortgage when this period is up.

the 20K is currently sitting in A & L and we are saving 1K per month into a Halifax online ?savers account

i am sure we could improve on this...

mortgage rate fixed at 5.54 for 2 years on £80K

appreciate your thoughts on this grumbler and all

anticlaus105

Open an online saver issue 2 at AER 5.15% (wi 0.9% bonus till 30/03/07). You will get the interest paid in Sept. You can only store max £25000 in this account as interest is not paid on balances over this.

You can also open an ICICI HiSave at AER 5.15% which pays interest monthly for when you fill the A+L account. They have had a few problems tho with customer service etc so if you apply now you should have the account in the next few months when you need it LOL. You are better paying into this account via bacs and not using the direct debit option it offers. I have one of these but wont put alot of money into it because of poor cust service.

These are the highest paying savings accounts that I know of at present but it could always change at some point so watch the rates.

EDIT: These are both instant access accounts.

grumbler

... and make sure all saving accounts are on your name to avoid tax. You should submit R85 form to the bank to have interest paid gross.

MrHelpful

Why would someone not have to pay tax on their interest. What cicumstances allow you to have gross interest paid?

grumbler

P.S. Also fill your 2*£3000 mini cash ISAs allowances every tax year. When your fixed rate period ends you could have more flexibility when having money on saving accounts instead of paying the mortgage off - even if you become a taxpayer. For example, my current (flexible) mortgage rate is 4.99% and we have about £30K in 5% ISAs. There is no point in using these savings to pay the mortgage: Overpay Mortgage or Savings Account . A&L ISA is now 5.2% (0.70%bonus until 30.04.07)

Wirenth

MrHelpful wrote:

Why would someone not have to pay tax on their interest. What cicumstances allow you to have gross interest paid?

If someone doesn't work, for example. Or if that person only earns enough to be below the threshold at which tax starts.

grumbler

MrHelpful wrote:

Why would someone not have to pay tax on their interest. What cicumstances allow you to have gross interest paid?

Everybody has personal yearly allowance that is not taxed. It is £5035 this year: http://www.hmrc.gov.uk/rates/it.htm

MrHelpful

Doh didnt know that.... Is there anyway you can go about reclaiming the tax paid on interest. As my mum hasnt been working for year but has still paid tax on the interest (i.e. received net).

grumbler

Yes, see http://www.hmrc.gov.uk/individuals/iwtclaim-a-tax-or-ni-repayment.shtml or just phone your tax officer ...