Saving for Christmas...

Beanz

Hi everyone,

I know it's a little late in the day to start saving for Christmas this year but I'd like to put something in place for next year.

At present I have a First Direct online savings account which may as well be empty! That is it in terms of savings! Everything else I have spare is going toward debt.

Would this FD savings account suffice for the Christmas fund or would I be able to use something like an ISA as recommended in Martin's article(s)??


Cheers,
Danny

ReportInvestor

Ipswich BS Target Saver @ 8.25% is the best rate unless you want to open current accounts with A&L or Barclays in order to open their regular savers. But you only get your money and interest on the anniversary - so would have to do your Christmas shopping in December.

Yorkshire BS 6.5% Regular Saver allows one withdrawal pa at any time so you could take the money saved (minus interest) in mid-November if that suited.

Both these accounts can be opened by cheque before setting up a standing order.

The ISA route could beat the YBS interest but not the Ipswich interest for a basic rate taxpayer. And many ISAs would be more flexible in terms of one off payments, changing monthly payments and withdrawing money more than once.

Beanz

Thanks for the follow-up!

How do I know if I'm a basic rate tax payer, what is the limit? I suspect I may be right on the edge of the limit but I'm not sure which way...

If I am a higher rate payer I take it I'd be better off with an ISA?

Cheers
Danny

jem16

Higher rate tax starts at £38,335.

If your savings interest takes you over this you would be paying 40% tax on any interest over the limit. So yes an ISA would be better.

tom188

Over £38,035 gross income pa makes you a higher rate tax payer.

Beanz

jem16 wrote:

Higher rate tax starts at £38,335.

If your savings interest takes you over this you would be paying 40% tax on any interest over the limit. So yes an ISA would be better.

How do I work out if my savings interest takes me over the limit??

Danny

tom188

Calculate how much interest you would earn in a year.
Add this to your current salary + any other sources of income.

If you go over 38335 then your in higher rate tax territory, taxed at 40%. (and generally tax return time if your not there already).

Beanz

Thanks for the help guys. Much appreciated!

Danny