SA tax held in premium bonds?

woodformoretrees

Hi,
I wonder if anyone can offer me experience on whether putting my self assessment tax money away in premium bonds each month (to be cashed and paid to HMRC twice yearly), is a viable idea?
I'm under no illusion that I'm going to hit the big time - more that it's money I don't want very instant access to.
Thank you
w

bigadaj

You can do this but it's likely for little return, you'd also be out of the draw for the month going in and ensure you give notice to get out in time.

Depending on teh sums you're talking about savings accounts, or actually interest paying current accounts would almost certainly do better.

Archi_Bald

bigadaj wrote: »

You can do this but it's likely for little return, you'd also be out of the draw for the month going in and ensure you give notice to get out in time.

You need to be in for a full calendar month after the month you made your deposit it - e.g. deposit today, and the first month you will be in the draw is May.

You don't need to give notice for withdrawals though they do take the old 3 working days to get your money into your bank. Withdrawals by cheque take a lot longer still.

I would put my money into a decent interest paying current account. That way i can be sure I get a bit of a return / protection from inflation.

xylophone

Flex direct? http://www.nationwide.co.uk/current_account/flexdirect/default.htm
Lloyds? http://www.lloydsbank.com/current-accounts/classic-account.asp
Clydesdale? http://www.cbonline.co.uk/landing-pages/currentaccounts/msmcad?sourceId=0001_msm_cad

woodformoretrees

Thank you guys.
I am definitely aware that I would do better with it in a savings account - so the thought of premium bonds is more a bit of fun. I certainly wouldn't be making much interest (although I know this is guaranteed return). So this is something in addition to my savings.
I just wanted to make sure there were no obvious reasons not to do it (such as period of notice, tax penalties etc).

jimbow25

Others have covered the periods of notice above.

Regarding tax penalties I'm sure exactly what you are thinking of - but premium bond wins are tax free. Penalties for late payment of self-assesment tax only start with daily interest at around 3-4% per annum (the inital £100 penalty you always hear about is for late filing only). If you are a few days late paying your 31/1 tax you will get charged a bit of daily interest but the first "nasty penalty", of 5% of the balancing payment, is only incurred on the balance still outstanding at 28th February. In my mind, that means paying a few days late is not the end of the world.