HELP!!! Tax Free Saver - Should I get an ISA?

debpike

My husband and I currently have £95,000 in a pretty rubbish savings account which needs to be sorted out. I only earn approx £4,000 per annum so all of the savings are in my name - am pretty sure I am not paying tax on them. We are hoping to be buying a new house at some point in the future, but hubby is a bit wary (keeps thinking house prices are going to drop - but has been saying that for about 5 years!) but it would be nice to have fairly instant access to the money when we need it. Should I get us both ISA's now and then again in a couple of weeks? Should I be putting the rest into a high interest account like ING or HSBC, opening a regular saver etc as per savings fountain? Brand new to MSE and need lots of help!

Reaper

You probably are paying tax on it. By default tax is charged unless you ask it not to be (by filling in an R85 form).

Furthermore you probably ought to be paying tax on it. Your income takes you close to the personal allowance for tax and the interest on your savings will take you over, unless you are getting a very bad rate. For example if you earn 5% interest on £95,000 that is £4750 on top of the £4000 you say you earn.

If my figures are right and you are a tax payer then you should indeed quickly both take out cash ISAs for this year, then again as soon as the new tax year starts. That's £12,000 sorted. I know Yorkshire Building Society do an online ISA paying 5.2%. Alternatively First Direct are offering one paying a huge 6.25% but the rate drops 6th October so will will need to transfer it somewhere better on that date.

If you feel you need instant access then a regular savings account is no good because it ties your money up for a year.

I'm not up on the latest savings accounts but I know Cahoot offer 5.1%

ED

debpike - welcome!

May be worth looking at Derbyshire Bdg Soc site, to examine current Terms of their regular, monthly saver a/c. Last time I looked it allowed one withdrawal per year, penalty-free, and deposits can vary up to £1,000 per month maximum. So effectively, customers have instant access (once per yr). Rate is 5.85% gross.

5.35% is offered by Alliance + Leicester for their Online Saver, with instant access.

A+L's ISA offers 5.40% (much teasing on MSE about £25 cost in event of transferring out...)

deemy2004

debpike wrote:

My husband and I currently have £95,000 in a pretty rubbish savings account which needs to be sorted out. I only earn approx £4,000 per annum so untain? Brand new to MSE and need lots of help!

On £95k in various top savings accounts you can relatively easily earn say 5.1% or £4845 gross, just about covering your allowance.

BUT £4k earnings on top... Thus you can't get ANY of your savings Tax FREE. What you need to do is fill in form R40 at the end of the tax year, which would calc the actual tax refund due taking into account the 10% tax band.

debpike

Thanks for all your help guys, we have gone for an ISA each, and a regular saver each with the rest in a websaver. I've requested the tax forms and am sure the IR can sort it all out!

Paul_Varjak

debpike wrote:

Thanks for all your help guys, we have gone for an ISA each, and a regular saver each with the rest in a websaver. I've requested the tax forms and am sure the IR can sort it all out!

Sounds like you have entrusted your savings to Halifax? Their Websaver account pays 4.9% gross and their regular saver 7.07% gross. If you have gone for their internet-only ISA that pays 5.15%. If you do decide to buy a house you can cash in the Halifax Regular Saver - but you will just be paid interest at the Websaver rate (4.9% gross).

Hope you manage to get an appointment to open a cash ISA this year! Halifax certainly only operate by appointment. And, yes, open another two cash ISAs on April 6th!

I would consider putting £20,000 into A&L savings account. This would earn you an extra £90 (before tax) of interest over a year than the Halifax Websaver account. The maximum you can hold in a Websaver account is £25,000 (so I have allowed leeway for growth). Or you could each open an A&L savings account and earn an extra £180/year (before tax) than the Halifax Websaver!

P.S. I have an A&L savings account plus several accounts with Halifax.