Saving a redundancy lump sum for a few months

james774

At the end of January, I am due to receive a significant redundancy payment, but don't know how to invest it for a few months.

I am hoping to move house at some point in the first half of the year, and will be using the lump sum for that - but I don't know what to do with the money until then. I don't really want it all sitting in my current account. I also don't want to be taxed heavily on it.

Any thoughts or suggestions on what some of the options could be?

Archi_Bald

For a few months, you are not talking about investments but abaout savings.

You can browse the forum, or read the article on the main site, for the best savings accounts.

If you want tailored ideas, you need to say how much money is involved.

Most likely one or two standard savings accounts will be your best bet.

You will pay 20% tax on any interest you get unless your total income for the current tax year (incl any taxable part of your redundancy pay) is below the personal allowance.

james774

Thanks - that's helpful, I'll take a look.

The total sum is around £40k. As you say, it will only be for a few months, so a savings account seems a good option.

Archi_Bald

2 Santander 123s will pay you 3% AER if you can re-coup the monthly charge.

There are other options for 3% but you would need 8 current accounts for it - which, even if you get them all, would give you a concentrated lot of credit applications on your credit file, which in turn might make your mortgage application (if you need one) next year more difficult.

Simplest is a savings account - if you are a very longstanding Nationwide customer, you can get up to 1.7% AER. The AA pays 1.5% AER.

Whichever route you go, don't expect to get rich from the interest. You are talking max £600 - £1,200 before tax for an entire year.

20% tax on all interest paid will automatically be subtracted. If you are a higher rate tax payer, you need to tell the HMRC or include the interest you get in any self assessment you make.

james774

Very useful - thank you.

atush

If you don't mind the lower interest, you can look at saving in NSI as they are tax free. Or ISas for the first 5-10K depending on if you are married or not.

In any case, I am assuming you have found alternative employment as otherwise spending it on moving house could be unwise.

Archi_Bald

NS&I direct saver is not tax free. They pay the interest gross but this doesn't mean you don't have to pay tax.

atush

they can stick it in premium bonds then, and an ISa or two.