Where to put 475k?

allisond

Hi we have finally just sold our house after 20months!! Hooray! We will have £475k to put somewhere though. Would you put the majority in Northern Rock (limit of £250k) and then spread out the rest over 5 other accounts because of the 50k limit or take the chance and put over 50k in some of the higher paying accounts. We need access to the money in case we suddenly find a house to buy and need the money quickly. The money will be in my name as I'm not a tax payer.

Many thanks
Al

ILW

The interest could very well make you a taxpayer.

Rollinghome

I would, and do, put funds over the FSCS limits if the rate justifies what I judge to be the extra risk but in your case, as this is money needed for your house, you need to be ultra cautious. The limits are £50k per person per account so you could put £100k into a joint account or £50k each into separate accounts and still have the full protection. You also need to make best use of your tax allowances.

PS. I see you say you aren't a tax payer so sort of cramps your style a bit. For a small amount of extra interest over what could be a short period play safe.

allisond

Thank you for the replies. How much interest can i earn before i become a tax payer? Is it 6k? Hopefully we will have found another house by then. So it may actually be worth putting some money in my husbands name in a joint account then? Is the tax rate on interest 20% no matter what you earn?

Baldur

Tax bands - http://www.hmrc.gov.uk/rates/it.htm

If you are a higher rate taxpayer, you pay 40% on interest.

allisond

Thanks Baldur - something else to consider!

Jonbvn

Interest at 3% for a year will take you way over the basic tax limit.

If security rather than interest is your concern, then aswell as NR you should consider NS&I products. Income bonds pay 2% are 100% guaranteed and give you instant access.

Ask yourself whether it is worth risking 50k to get 5k?

nicko33

allisond wrote: »

Is the tax rate on interest 20% no matter what you earn?

If your only income is from interest on savings, then you can benefit from the 10% starting rate, so you should make sure you have enough in your name to utilise this.
Your husband probably cannot benefit from this if he has other income.

So each year you yourself can have income of
£6475 tax-free
£2440 at 10%
£35160 at 20%
the rest at 40%

whereas your husband probably gets
£6475 tax-free
£37400 at 20%
the rest at 40%

Rollinghome

You'll need an old envelope to do the sums. Remember the good old days when a spouse could just reassign their own tax allowance to her/his partner without all the juggling now involved? Life was so much simpler...

allisond

thanks everyone, really valid points. As i say it's only short term hopefully, until we find a house, so no we don't want to risk going over 50k. nicko33 thanks for the breakdown it's extremely useful. rollinghome - i'm not that old! but yes i'm sure life was much easier back then!! just more agro to get you to part with yet more money!!!!

withnell

Jonbvn wrote: »

Ask yourself whether it is worth risking 50k to get 5k?

When considering this remember that UK retail savers have been reimbursed for all capital invested in collapsed banks, which makes the risk of loss pretty much zero