Savings account calculations, Am I missing something?

lorenzo85

Ok


So I have some savings that are earmarked for a house deposit that I may or may not need depending on finding something to buy.

The best quick access ISA I can get pays 1.75% and of course is tax free

According to martins email today First directs regular savings account pays 6%

I'm a higher rate tax payer so will pay 40% tax on the interest earned.
So even deducting the tax First Directs savings account would pay me 3.6% interest for money kept there?

Even if i had to go for an easy access savings account (3%), that would be 1.8% after tax

So the ISA doesn't stack up and I'm better off with the savings account?

or am I missing something?

moneysavinggirl40

lorenzo85 wrote: »

Ok


So I have some savings that are earmarked for a house deposit that I may or may not need depending on finding something to buy.

The best quick access ISA I can get pays 1.75% and of course is tax free

According to martins email today First directs regular savings account pays 6%

I'm a higher rate tax payer so will pay 40% tax on the interest earned.
So even deducting the tax First Directs savings account would pay me 3.6% interest for money kept there?

Even if i had to go for an easy access savings account (3%), that would be 1.8% after tax

So the ISA doesn't stack up and I'm better off with the savings account?

or am I missing something?

yes you're right isa savings rates are poor compared to normal easy access and fd regular saver, shame that you're on high tax. i think this then encourages ppl who are getting poor interest in their savings account to pay off debts such as mortgages rather than saving, which means banks recoop their loaned money sooner.

Vortigern

lorenzo85 wrote: »

... am I missing something?

Yes. First Direct's regular saver allows you to save up to £300 per month for a year. It's not instant access, in that you would lose almost all of the interest if you closed the account early for your house deposit.

If you have a lump sum, but may need instant access, you should consider one (or more) of the 'high' interest current accounts - Santander123, Lloyds Vantage/TSB/BoS, nAtionwide, Yorkshire, Clydesdale.

innovate

You might also be able to reduce your tax liability back to basic rate if you increase your pension contributions. Though anything you put into a pension will of course be locked away until you are 55.