Advice please asap!

sfenn

Hello,

Hopefully someone can advise me on the best way to make the most of my savings (small amounts! )

I currently have £1000 in my normal HSBC savings account (I save £500 a month). Next week i will be receiving my bonus which i estimate/hope after tax will be £3000.

I would like to know what is the best way making some money on the £4000 and where is the best place to save my £500 a month.

I've had a look at different websites but what i don't understand is would it be better to use a cash isa for £3600 before the 5th April to save paying tax (does the interest differ with each bank?) and how long would it need to stay in there or put it into an instant access saver and get the interest (can i add to it each month?)

Im really confused...

Im sure loads of you know what you're doing so look forward to the replies! :rolleyes:

Rustvaar

If you don't have an ISA already it's often advised you get one of those first as it's Tax Free which is a nice bonus and the money can sort of 'roll over' so in year two if you hit £3,600 again you'll have £7,200 tax free and so on. It can really build up if you have the capability to safely put money away to it.

I think we have ~23 days left before the end of the tax year - I'm not an expert but I think that means if you ask to open an ISA for the tax year 2008/2009 it means you'll be fine to open one for 2009/2010 come April 6th (Can someone please confirm on this for us?)

Each bank will offer different rates on their ISAs and some will offer bonus for it being an 'e-ISA' (online) some will penalise for any withdrawals, other for more than two in a tax year, some are instant access but once you've hit your £3,600 limit if you withdraw £600 you can't put it back in. This works with any amount, e.g., put in £1,800 - Withdraw £800, you have £1,000 left in the ISA but can only put in another £1,800.

If you get your £3,600 into an ISA now then (I think) you should be able to find an ISA that allows you to put in £500 per month, again once you max out the £3,600 you'll have £7,200 sitting tax-free.

You're only allowed one ISA per institution per tax year, a fairly straightforward rule that often caused confusion (especially where I used to work) - effectively you can have any amount of ISAs you want, you could open ten with different banks and then at the last minute decide which one was offering the best interest rate and use it - the difference is you can't split the money over more than any one ISA. (Edit: Read over this, I seemed to confuse matters even more. You can OPEN any number of ISAs but you can ONLY INVEST IN ONE!)

You can have an ISA with RBS this year and open one with HBOS next (tax) year (06/04/09).

You can probably find the best interest rates in 'Savings and Investments' on the Money Saving Expert Website.

Hope this is helpful.

sfenn

Just had a another look;

Halifax International Regular Saver
5%AER for 12 months on deposits of £100 - £2000 per month. NO withdrawals allowed during 1st Year.

Does anyone know how much tax would be taken if i used the above account to make it worth using instead of a cash ISA???

Rustvaar

I know it doesn't help much, but you'd be getting 3.2% AER Net if you're a basic rate tax payer, higher rate of tax you'd be getting 2.4% AER Net - But that's an annual equivalent rate. (of four percent, not five).

With the ISA you can drop £3,600 in one go and begin earning your interest from day one. With this you'll have to drip feed it for a few months before the return begins.

Again, I'm not 100% on this but I believe the tax rates are 20% and 40% which are based on how much you earn. If you know your tax code it'd help

Edit: Can you really lock it up for a year - what happens if something bad happens, something really bad; It may be unlikely or it may seem impossible but just keep it in mind, if something happened to you or your circumstances really changed and you had to draw on the funds you'd be penalised.