Don't know what to do with 16K

sl_jones

Hi,
Long ago my nan and grandad saved up around 16K for me but using some kind of trust (i used to remember a man coming around the house and he would invest it for them).

So when i was 18 i put the money in a Cash fixed rate ISA with the halifax that give me 4%, i remember the guy told me at the time that it was risky as there was a chance that interest rates would go up in the next 4 years. (oh how he was wrong)

4 years later and the ISA is due to mature and i now don't know what to do with the money, i don't want to spend it but I am not sure where the place is for it.

I currently have a S&S ISA with nutmeg, however i don't really want to put all that i have in stocks and shares.

I was thinking the best plan might be to draw it in out and stick it into a savings account and then open a new Regular saver with Nationwide and transfer it bit by bit into it.

Any thoughts?

masonic

There are regular savers available that pay 6% and 4%, and also current accounts that pay 5%, 4% and 3%. All have certain hoops to jump through, but it is not very difficult to do so. Depending on how much you are able to save in the future, it might make sense to transfer some of the money to a S&S ISA to preserve the tax free status.

Archi_Bald

You are right, you should have some money in readily accessible cash for any emergencies.

Assuming you have a decent credit history, you should look into opening a few of the interest paying current accounts. Tons and tons of information about these on the forum.

I addition, you could dripfeed £800 a month into 6% Regular Savings (M&S, FD, HSBC) and the Cub Lloyds 4% monthly saver. Pays more than double the interest you can get in a Nationwide Regular Saver.

sl_jones

However i put them into anything other then an ISA, would i have to then pay tax on it, as i am still going to continue to save into my stocks and shares?

Archi_Bald

Would you rather get 3 or 4 or 5 or 6% interest you pay 20% tax on, or 1.9% tax free?

sl_jones

Well i'd previously had a regular saver with first direct that i shut down as i was being taxed around £1 a month. So for my 6% interest lost £12 a year.

Also my tax free limit is 15,240 so that wouldn't cover all of the 16K anyway, i also wouldn't want to put that all into tax-free as I want to still pay into my S&S isa.

Would it not be better to put a little in tax-free instead of paying 20% tax on the whole 16K over say 3 different accounts?

SalarySlave

Hi Sl_jones
I think you may be misunderstanding how tax on savings works. You only pay the 20% on the interest you generate.

For example 16000 at 5% interest will generate £800. You pay 20% tax on this £800 which is £160. and then you keep £640

In a tax free ISA you would earn 1.6% interest that is £256 and pay no tax.

As you can see the current accounts pay way more despite the fact that you have to pay tax on the interest earned.
You never have to pay tax on the actual amount saved. Only on the interest that is generated from that savings. Hope this helps

Eco_Miser

sl_jones wrote: »

Well i'd previously had a regular saver with first direct that i shut down as i was being taxed around £1 a month. So for my 6% interest lost £12 a year.

If you were paying £1 a month tax, then you were getting £5 a month before tax, and keeping £4 of it.

You are concentrating too much on reducing tax, what you should be looking at is maximising your after-tax income.

3% gross is 2.4% tax-paid - which is better than 1.9% tax-free. 4%, 5% and 6% are even better.