ISA or first home savers account

bladesharp

Hi,

Need some advice on what account I should set up to start saving for a house. Would I be better of setting up an ISA or taking out a first home savers account such as the first home saver account with santander.

I dont really understand it all so any advice is much appreciated.

Lokolo_2

Your best option will depend on your personal circumstances, if you tell us more about yourself then we can give a more specific answer. :j

Age range? Level of income? Amount you intend to save? Do you need access to your money or could you keep it locked away?

ISA's for example are most beneficial to those in employment who earn over the personal allowance, as you can get tax-free interest.

However the Santander first home saver does offer a good rate although interest is taxable if you earn over the personal allowance.

There are advantages and disadvantages to both so you need to tell us more about you

bladesharp

I am currently earning 18,000-22,000 while my partner is in full time education with a weekend job.

To start with we are looking at saving around £200 a month possibly in a joint account. The money does not need to be accessable.

What is this personal allowance you mention?

Jake'sGran

bladesharp wrote: »

I am currently earning 18,000-22,000 while my partner is in full time education with a weekend job.

To start with we are looking at saving around £200 a month possibly in a joint account. The money does not need to be accessable.

What is this personal allowance you mention?

If you look at the Inland Revenue's web site
you will be able to see the list of tax free allowances. To find the right page just Google "Inland Revenue+Tax Allowances".
My personal allowance is quite high because of my age and I do not earn enough from dividends etc, therefore I am allowed to have interest on savings paid gross.

I would have a look around for the best fixed rate accounts. Santander may pay a good rate but they have an awful reputation on these boards.

donkingkong

If you transfer your current account to Santander Current you could get a 6% (4.8% after tax) regular saver and save £200 for 12 months and then put that into a Santander FHS at 5% (4% after tax).

Best ISA is 3ish% with no tax.

Lokolo_2

bladesharp wrote: »

I am currently earning 18,000-22,000 while my partner is in full time education with a weekend job.

To start with we are looking at saving around £200 a month possibly in a joint account. The money does not need to be accessable.

What is this personal allowance you mention?

The personal allowance is the amount of income you can earn tax-free before you start paying tax http://www.hmrc.gov.uk/incometax/personal-allow.htm
You will probably be entitled to £6475 of tax-free income before you start paying tax.

Yes, DonKingKong is correct in mentioning 2 accounts which would pay more interest than an ISA, however ISA's are seen as a longer term thing, which might suit you if you are saving for a house, as when interest rates eventually rise, you can get a better paying ISA account (even though mortgage rates will also rise - you can't win!)

What I forgot to mention is that an ISA cannot be held as a joint account, it must either be in your or your other half's name.

Also to bear in mind with the regular saver, after 1 year the rate will plummet, but it may be a good option as the longer term ISA's dont allow further deposits after the initial deposit which would not suit you at all!