Investment Advice

MUDGUTS

Hello everyone,

I am looking for some investment advice.

I am 2 months away from being free from Credit Card debt and have no overdraft. I have around 6 months remaining on a Halifax debt (defaulted and now administered by B.O.S)... Although this affects my CR there are no charges or interest on this, so I'm in no rush to pay it off. When this has gone I will be 100% debt free.

I will have an average of £1000 per month to put away each month (sometimes more, sometimes less, for example when the MOT is due on a household car).

It looks like an ISA is a good way to go to start and I have a question about these: Once you get into the second year, is all the interest on year one savings tax free and does it continue as such or does that then become liable?, I assume you can put the max away each year and that is how it works...

Once I have filled the ISA, where do I put the money? I want to very slighty diversify and was thinking about some shares but not a lot of money and also for the much longer term. Also Premium bonds.

Any advice gratefully recieved.

MoneySaverLog

Yes cash isas continue to earn interest tax free and you can add up to your yearly allowance every year. As there's a limit in how much you can subscribe each year you'll need to look at other places to put the remainder of your money.

I'd suggest regular savers like First Direct 8% (£300 max per month) and HSBC 6% (£250 max per month) They last 12 months and you'll then need to find another home for that money. May be next years ISA.

You have to keep your eyes on the rates though as they drop after a while. With ISAs you have to do transfers using transfer forms from the new provider to keep the tax free status of that money.

MUDGUTS

Thanks MoneySaverLog.

So lets say an individual has £5640 to invest / save each year, provided they put that into a cash ISA, they will never pay tax on the interest on any of that as it grows?

Next stop is a regular saver savings account.

Finally, transfer ISA funds each year to the one paying the best and the same with regular saver accounts.

I'm planning on buying £1000 of Premium Bonds and also putting a small amount into shares.

xylophone

So lets say an individual has £5640 to invest / save each year, provided they put that into a cash ISA, they will never pay tax on the interest on any of that as it grows?

Yes, unless the government has a change of mind.

I'm planning on buying £1000 of Premium Bonds and also putting a small amount into shares.

PBs okay for a bit of fun - might be better to use your ISA allowance and contribute your small amount monthly into an OEIC (Hargreaves Lansdown offer a scheme - you might consider something like Invesco Perpetual Distribution Acc and opt to reinvest the tax credits) or perhaps an Investment Trust.
http://www.thisismoney.co.uk/money/investing/article-1724731/The-best-ways-buy-hold-investment-trusts.html
http://www.fool.co.uk/news/investing/2011/10/19/save-regularly-using-investment-trusts.aspx
http://www.what-isa.com/features/Investment_trust_ISA.htm

Thrugelmir

MUDGUTS wrote: »

I have around 6 months remaining on a Halifax debt (defaulted and now administered by B.O.S)... Although this affects my CR there are no charges or interest on this, so I'm in no rush to pay it off. When this has gone I will be 100% debt free.

May well affect your ability to obtain a mortgage. So the sooner a payment plan is cleared the better. As this may come back to bite you at a later date, in the form of a higher interest rate on your borrowings. Far outweighing any savings now.

MUDGUTS

Thrugelmir wrote: »

May well affect your ability to obtain a mortgage. So the sooner a payment plan is cleared the better. As this may come back to bite you at a later date, in the form of a higher interest rate on your borrowings. Far outweighing any savings now.

That's a good point, and also why I want to clear it in full rather than go for a 'settlement'. I don't plan on buying a house for some time, around 5 years or so. Hopefully this will be clear from my credit rating by then.

Thrugelmir

Will linger on your credit report for 6 years from date of final settlement.