Best savings options for non-tax-payer?

claralou

Hi there

I have recently become a postgrad student so my income will be below the tax threshold for the next two years.

Is it still worth me paying £3k into an ISA (if I can!) this year or can I get better rates without the tax from a standard savings account instead of ISA?

Any advice greatly appreciated!
Thanks
Claire

Mr_Mumble

Hi Claire,

If you don't plan to withdraw the money in the next year or two you will get a higher rate of interest by using regular savings accounts efficiently, check Martin's article here:
http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1108401263,93536,

Paying into a cash-ISA now would earn less interest than efficiently using regular savers but you'll continue to get the benefit of tax free status for many years to come, i.e. when you do become a taxpayer.

Your decision should be based on your personal circumstances. E.g., if you may need to dip into the savings then an easy access cash-ISA is likely to be more flexible than a regular saver. If you anticipate using the cash in a few years time, say for a mortgage deposit, then the Lloyds 8% regular saver is a good option. If you're looking at the longer term then an ISA should offer compounded tax savings.

If you go with a regular saver or standard savings account make sure you fill in an R85 form to get paid gross.