Santander help to buy ISA

iainmay123

Hello all

I just took a look at the Santander H2B ISA. It pays 4% with a max initial deposit of 1600 then 200 a month.

I am not really in the market for a help to buy ISA, although I am what you would call a first time buyer. Can anyone suggest a reason why I could'nt use this as a decent (but limited) return ISA?

Some other info

I am saving to go travelling and want to leave a contingency fund for when I get back.
I plan to maximise my 123 account tax free status, but thats going to be limited by being a higher rate tax payer
I already have a 123 regular esaver set up and ready to go, meaning if the ISA is possible I can dump £400 a month on a regular basis into a 4% compound and 5% teaser account.
I am looking to save around 2000-2500 a month for 18 months

Thoughts please, am I missing something here, or is this the ISA for me?! I "might" even want to use it to buy a house when I get back...double bonus maybe..,.

Thanks

Iain

iainmay123

Second thought

If you are already a homebuyer, is there anything actually stopping you opening one as a limited deposit ISA? The government bonus is only payable during the purchase of a house, presumably checked by the lawyers etc....does the bank check your status when providing these accounts....do they even care?!

Lingua

I believe you have to be a first-time buyer - they will check if you own property (or have done before).

Also, the initial deposit is £1200 not £1600 so far as I know (£1000 lump sum plus £200 for that month).

If you want to draw this money back out and use it for something other than a home, I would suggest a high-interest current account. TSB and Nationwide both have good offers at 5%, with the TSB account being variable but unlimited in time (until they lower the rate), and the Nationwide one being for a year. Both pay better interest than the HtB ISA unless you are using the money to buy a home.


Lingua

YorkshireBoy

Upon applying for the account, you will be asked to sign a declaration saying you don't own property, nor have you ever done. Best not to lie, as deception to gain a pecuniary advantage is a serious matter!

iainmay123

Ok, but what about as a high interest ISA? I can tart about with other savings accounts but they will all attract tax...most of the other interest rates I have seen with ISA's are total garbage compared to 4%, and most teaser rates are also limited, take the reg esaver for example, £200 PCM max deposit for 5% but its taxable for me after I earn £500 in interest....at 40%.

I guess the real question is, do I want to take a lower rate of interest, with no tax but a £15k maximum annual deposit or a higher rate with no tax and an annual limit of £3400 in the first year.

And there was me thinking this was going to be a simple choice

diamonds

YorkshireBoy wrote: »

Upon applying for the account, you will be asked to sign a declaration saying you don't own property, nor have you ever done. Best not to lie, as deception to gain a pecuniary advantage is a serious matter!

The OP might be a MP and then its just a 'honest mistake' :rotfl:

Lingua

iainmay123 wrote: »

Ok, but what about as a high interest ISA? I can tart about with other savings accounts but they will all attract tax...most of the other interest rates I have seen with ISA's are total garbage compared to 4%, and most teaser rates are also limited, take the reg esaver for example, £200 PCM max deposit for 5% but its taxable for me after I earn £500 in interest....at 40%.

I guess the real question is, do I want to take a lower rate of interest, with no tax but a £15k maximum annual deposit or a higher rate with no tax and an annual limit of £3400 in the first year.

And there was me thinking this was going to be a simple choice

If you aren't a first time buyer, you can't get the ISA according to the post above, so I'll go with that.

Why not split your money - some into current accounts and some into an ISA? ISA interest does not count towards your £500 tax-free interest allowance. Besides, to earn £500 interest in a year you need upwards of £10'000 in savings. You haven't mentioned how much you can save. If you give an indication of how much you can put away, we can give advice (good or not ) on whether an ISA or high-interest current accounts would work better for interest.

Of course, current accounts do not provide tax-free benefits, and the govt could change the allowance in future, so an ISA (despite being lower in interest) is really the best place for long-term savings. You could always put your money in current accounts, then open a decent ISA at the end of the 2016/2017 tax year and stash all of your savings in there (plus the interest accrued over the year), thereby getting the interest rate you want AND a tax-free wrapper for the future.




Lingua

iainmay123

Lingua wrote: »

If you aren't a first time buyer, you can't get the ISA according to the post above, so I'll go with that.

Why not split your money - some into current accounts and some into an ISA? ISA interest does not count towards your £500 tax-free interest allowance. Besides, to earn £500 interest in a year you need upwards of £10'000 in savings. You haven't mentioned how much you can save. If you give an indication of how much you can put away, we can give advice (good or not ) on whether an ISA or high-interest current accounts would work better for interest.

Of course, current accounts do not provide tax-free benefits, and the govt could change the allowance in future, so an ISA (despite being lower in interest) is really the best place for long-term savings. You could always put your money in current accounts, then open a decent ISA at the end of the 2016/2017 tax year and stash all of your savings in there (plus the interest accrued over the year), thereby getting the interest rate you want AND a tax-free wrapper for the future.

Lingua

Hi Lingua.

Here is where I am at:

Debt free as of about 30 mins ago, I decided to clear an old card and stop paying the interest.

I have a santander 123 current account which will have £1500 quid in it at the end of the month, I am obviously looking at getting that to over 3k asap.

I have a santander regular e saver that I just opened which has 200 quid in it

I have applied for a TSB plus account which I intend to keep at £2k next month, taking advantage of the 5% cashback on applepay (topping up as I go).

I am a high rate taxpayer, but earned hardly any interest this year, I guess that means my tax code will be nice to me at least this year?

I want to leave to go travelling around Sept/Oct 2017. Exact date depends on when I hit the higher tax rate in terms of YTD tax paid (I am planning on claiming back the overpaid tax in the 2017-18 tax year).

I think I can hit around £38k of savings by that departure date, with an approximate £10k of return funds in the form of the tax rebate (4k), selling the car/worldly goods/flat deposit etc. That 10k can be locked up but still needs emergency access should something terrible happen.

My worry is that when I hit around 16k of cash savings I will be earning enough interest to start paying tax on it. An ISA seems the best vehicle for avoiding this, but getting a rate that is greater than the 3-4-5% I would be getting on my non ISA accounts, even after tax is a bit of a challenge....

Thoughts?

colsten

iainmay123 wrote: »

My worry is that when I hit around 16k of cash savings I will be earning enough interest to start paying tax on it. An ISA seems the best vehicle for avoiding this, but getting a rate that is greater than the 3-4-5% I would be getting on my non ISA accounts, even after tax is a bit of a challenge....

Thoughts?

You won't find an ISA that takes all the money you want to save. The HTB ISA takes chicken feed only, and if you wanted a cash ISA alongside it, you'd need to settle for one from a split ISA provider. The 'penalty' on split ISAs is that they pay abysmal interest on both.

You'll do much better with current accounts and regular savers. It will take some setting up but you should be able to achieve 3%+ after tax on all of them. If you set up the RS accounts in the next tax year, all your interest on them will be paid in 2017-18, and you might consequently be able to play about with the amount of tax you have to pay.

Although it sounds you are intent on liquidising all your assets for your travels, I mention it anyway: contributing to a pension might reduce your tax liability to basic rate, and your older self might be quite grateful to yourself if you started putting something into a pension early on.

The top interest paying accounts are in this thread: https://forums.moneysavingexpert.com/discussion/5374614

iainmay123

Nice one thanks Colsten.

I already put into a pension at the moment, not anywhere near enough but its going in all the same. I am thinking about dumping it at the end of the year so I can save a bit more toward my travel fund, though now I am thinking about it from a tax perspective that might not be such a smart idea.

That said, the end goal here is to leave with as much liquid cash in the bank as possible so I can travel for as long as possible.

I am toying with the idea of a IFISA, but dont really want to put my return fund into anything too risky