What would you do in my situation regarding current savings and ISA

Thomo2710

Hello,

I currently have 6.5k in a savings account paying 1.6%

Also have 6k in a 2 year old ISA account, but still pays 2%

By my own simple maths over the next 12 months

Savings will pay £104 give or take, minus the tax
ISA will pay £120 give or take.

Should i keep both where they are or should i move the whole lot to my Santander 123 Current Account and get the 3% interest on the whole lot (not sure how much tax is applied though) (household bills/direct debits cashback etc cover the account monthly fee)

3% will pay £375 minus the tax give or take.

Is it safe to have this much in a current account?

At what rate is tax deducted from current accounts?

Thankyou for your thoughts

jimjames

I wouldn't do any of those options.

I'd put

£2000 in TSB
£2500 in Nationwide
£2000 in Tesco
Switch money via Halifax each month

Total interest

£100 (TSB)
£125 (NW)
£60 (Tesco)
£75 (Halifax)

Total for the year is £360, that's 5.5% gross.

Why would you use a savings account getting £104 in preference to £360. Yes it's more effort but worth it for £260 in my view.

Can use Lloyds at 4% for £5k and £1k into Tesco for the remaining £6k

No safety issue with current accounts if you take care of the details and if you're worried cut up the card.

Thomo2710

jimjames wrote: »

I wouldn't do any of those options.

I'd put

£2000 in TSB
£2500 in Nationwide
£2000 in Tesco
Switch money via Halifax each month

Total interest

£100 (TSB)
£125 (NW)
£60 (Tesco)
£75 (Halifax)

Total for the year is £360, that's 5.5% gross. Why would you use a savings account paying 1.6% in preference.

Can use Lloyds at 4% for £5k and £1k into Tesco for the remaining £6k

Thankyou Jim,

Just to clarify im considering moving all 12.5k to my Santander 123 account at 3% interest, as opposed to leaving it in the 1.6 online saver.

bowlhead99

I would move it all to Santander, because I couldn't be bothered with lots of small higher rate accounts as JJ does to eke out a higher overall rate. After all, you said what would we do and not what is the absolute maximum interest that could be earned.

Santander pay a good rate of interest all the way up to £20k. Yes it is safe to have that much in one account, as the financial services compensation scheme guarantees it all the way up to £85k per person.

Tax is deducted at 20%. (so £75 on £375 give or take).

If you're a higher rate tax payer you will owe HMRC a bit more because you are supposed to pay tax at 40% and the bank only deduct 20% at source. However from next tax year (2016/17) there are new rules coming in which will get you out of paying any tax on the first £1k of savings interest and the banks will stop deducting at source.

In your shoes I would use Santander, unless you are the type of person who will be much more likely to spend all your money if it's conveniently in one place, in which case maybe you would benefit from having it all split up, to protect you from yourself.

Eco_Miser

jimjames wrote: »

I wouldn't do any of those options.

I'd put

£2000 in TSB
£2500 in Nationwide
£2000 in Tesco
Switch money via Halifax each month

Since the OP already has a Santander 123, he may as well use that as Tesco, for exactly the same interest.

Personally, I'd put £2000 in TSB and £4,500 in Club Lloyds, a little simpler and no messing with time-limited accounts.