Exceeding Personal Allowance on interest

clairbear1000

Hi,
Firstly thanks for reading. I expect there is no good answer to this question but in case i have missed something...
I have approx. 79K in a 1 year fixed ISA maturing in April (Charter 1.61%) and last years 20K ISA maturing at the same time (Coventry 1.51%) and by then I will have 56K in other savings (Marcus 1.5%). 
So at the point of maturity, if I move 79K to best 12m fixed ISA and then last years ISA + 20K of savings to this years ISA (separate due to FSCS protection). I will still have 36K in savings which is about all I can have to meet the tax threshold at current rates.  
I will hopefully continue to save 3K per month. Should I move this money to premium bonds on a monthly basis, I want to max out interest but ideally not having to self-assess if I can get away with it. 
Having written it down, you are just going to tell me to pay tax on my interest aren't you?

Speedbird676

Pay tax on your interest 

It's better to earn the interest and pay tax on it than earn nothing at all.

EthicsGradient

If you're a higher rate taxpayer (and it sounds like you are, if current interest on £36k will put you around the PSA, ie £500), then, yes, premium bonds sound like a fair place to put some of it to avoid self-assessment and paying some tax - even with the decrease in prize money they just announced. 
This assumes you're sure you only want to save this money, rather than put it into a pension (do you have an employer who would contribute any more, if you did?), make overpayments on a mortgage, or invest for the long-term.
You could also look at a regular savings account, eg Coventry pays 2.5%, on up to £500/month. That could involve working out the interest you get on that, and putting slightly more into Premium Bonds at first, to keep the Marcus/Coventry total interest below £500.
If you're married, you could also check to see if the savings and ISA allowances are split between you as efficiently as possible.

Vortigern

You have sufficient cash savings to cover any emergency, so it's time to look at investments and pensions.

For your monthly excess cash, regular savers pay better rates than ISAs, even after tax is deducted.

clairbear1000

Ok thanks, this is something to think about. 
I am not married and own no property. Despite thinking I would by now this money is there for when my personal family circumstances make it the right time which is why I had initially wanted to keep it is fairly easy to access accounts (rather than long term investments). Regarding pension, my work pension is maxed at 4% for me and 8% for employer. I do have two old employer pensions that I need to look into (29K and 48K). Pensions are not my strong suit so I will read up on allowances to perhaps see if some could go in there. I will also look at the Cov Reg saver too.

bowlhead99

clairbear1000 said:

Regarding pension, my work pension is maxed at 4% for me and 8% for employer. I do have two old employer pensions that I need to look into (29K and 48K). Pensions are not my strong suit so I will read up on allowances to perhaps see if some could go in there. I will also look at the Cov Reg saver too.

The standard annual allowance for pensions is £40k a year unless you're getting over £150k of income and pension contributions in which case it starts to taper down. 

If you and your employer are only putting in 12% between you and you earn less than about £160k you'll still have half your annual allowance left. As your existing pension contributions are still leaving you a 40% taxpayer, there would seem to be plenty of scope to increase contributions and save 40% tax on the salary you're no longer taking, if you don't mind locking the money away to let it grow until your late 50s.

Generally when people say they are making 'max' contributions to their workplace pension they just mean they are contributing enough to get the maximum amount of free money from the employer. They don't really mean that they are literally maxing out the £40k allowance to get all the tax relief.  So they may just be doing what you're doing and building up cash balances inside ISAs to be eroded over time by inflation - rather than investing to let the money grow over the longer term with the benefit of higher rate tax relief thrown in.

If your workplace pension literally won't allow you to pay extra into it for some reason (which would be unusual), you could always start a private pension with it.

Of course if you are looking to maximise the money for a deposit on a property or to grow a family etc, you probably don't want to put every last penny into a pension and be stuck without it. A mix of savings, S&S ISA and pension is usually the way to go.