Self employed, 20k of savings but unable to get a mortgage.

DaveWhite

Hi

Due to an accident a few years ago I had to give up my 40k salary and go self employed.

I'm doing a bit better health wise now, but have to remain self employed due to the hours I am able to work.

I did 16k of profit last year, and have since acquired another business and am forecasting 22k this year.

I have about 20k of cash in savings and liquidity from my business, but I'm not going to be able to get a mortgage because I haven't even completed my 2nd year of trading yet so no proof of my income.

I've just split up with my partner and would like to be able to buy a flat, but that seems all but impossible.

To get to the point - it seems crazy to have 20k sat around not making me any money.

I can't afford to lose 1k of it - where shall I put it so that it accumulates somewhat, my ISA rate is pathetic.

I won't need access to it in the short term not being able to use it as a depost...

Thanks

DW

DaveWhite

I've done a bit more reading, and it seems that the Santander 3% current account is the one to go for.

If I put my 20K in there I'd get around £458 over 1 year, which is going to be far more than my 1.25% ISA pays.

I don't really understand the advice on MSE blog about moving it into an ISA in March, I can only see the merit of doing that if the ISA is going to pay out more interest than the current acount in the next year.. Whats the point in having it tax free if it doesn't accumulate as much money?

Can someone explain with an example, or advise on whether I need to plan to move my cash back into an ISA in March?

Aretnap

There are better accounts than the Santander one which you could use for some of the money. TSB Classic Plus pays 5% on up to £2K, Nationwide also pay 5% for a year on up to £2.5K, and Club Lloyds pays 4% on up to £5K. Remember there's no limit to how many current accounts you can have, and the minimum deposits can be paid by setting up standing orders to cycle money between the accounts - there is no requirement to pay in your actual salary (or self-employed equivalent) every month.

It's an unusual situation for current accounts to pay more interest than ISAs and plausibly ISAs could become a better bet in future. Since the rules have changed to allow you to withdraw money from your ISA and then re deposit it in the same tax year without using up your ISA allowance there might be something to be said for putting money back into an ISA at the end of a tax year, then taking it out again at the beginning of the next tax year. It doesn't earnyou more interest, but it does give you more flexibility if you want to move the money back into an ISA permanently in future. In your case though £20K is not far above the annual allowance so you could move most of it back into an ISA in one tax year anyway - so you might well thing that it's not worth the bother.

bigadaj

No, no advantage in moving it into a cash isa at all.

You can put it into Santander but there are current accounts for smaller sums that pay higher rates, up to 5% and also regular savers layung up to 6%, just need to cycle money through them monthly and set up direct debits for some.

Bank account savings .co.uk is a useful site that describes the highest paying combination, though whether the hassle of multiple accounts is worth it is up to you, it is for some and not for others.