Saving for a house in 3 years

dean_ham

Hello everyone  :)

This is my situation at the moment. I am 19 and im looking to be buying a house in roughly 2 to 3 years time.

I have £10500 available to me and i also have £2500 in an online savings account with egg.

I have been reading this website about saving and it says the first thing you need to do is put £3000 in a mini isa before the 5th of april.

What i cant understand is whats the incentive of putting £3000 in a mini isa where it pays roughly the same as my online savings account.
Does the tax free mean that the money will be taken out of my basic pay which is roughly £13,000 a year so my taxable pay would be £10,000 a year?

Thanks for you help, its just i am unsure about how its tax free, as far as i am aware my egg account is tax free?

Dean

deemy2004

Your egg interest will be paid to you NET so if its 5% you will get 4% added to your egg account, the 1% will be sent off to the Inland Revenue, ready to be wasted by New Labour. So ineffect you are taxed twice, once when you earn the money and again on the interest when you save the money.

Tha Cash ISA will pay you GROSS so if its 5% then that is what you will recieve i.e. 5%, thus TAX FREE

Walletwatch

Dean_ham

The interest that is paid to you on your egg account is paid to you net (if you have the online savings account paying 5.5% in the first six months, you'll actually get an equivalent of 4.4% per annum as the 20% will be cut towards tax)

The cash ISA would not cut the 20% tax, but would pay you the whole amount. So, you are, in effect, getting the full 5.35% interest on an Abbey postal ISA v/s an egg savings account which only gives you 4.4% for the first six months (and even lesser thereafter)

Cheers
WW

dean_ham

Thanks for the replies guys.

One more question, does the money go into cash isa's before your wage gets taxed, £3000 less taxable pay per year? or does it work just like the online saving accounts except you dont get taxed the 1%.

I really want to be investing £3000 in an isa before the 5th april then

I am also paying into a pension which is organised by my company (bosch) paying 5% of my wage into a pension and bosch are also contributing 4% of my wage aswell. Will this affect mini isas in any way?

deemy2004

You put your NET earnings into cash ISA's
I.e. they work like your online account, without tax deductions.

The pension is completely different to a cash-ISA, yeh the only similarity is that interest credited would be gross, but the tax man will be standing there ready for his share when you start drawing it down (barring 25% lump sum), anyway thats for the pensions board

mary

I might be stating the obvious, so sorry if I offend.
You choose your own ISA and pay into it yourself by cash/cheque. It's got nothing to do with your employer.

david78

Agree with what everyone says.

Just to add, good luck with your savings and eventual house purchase.