Savings Advice Following 'Promotion' to HR Tax Band

skybluearmyontour

Hello All,

I've recently received a pay rise which has pushed me into the higher rate tax band for the year. I knew the rise was coming but hadn't really clocked at how much it would be (linked to inflation + performance...having already received a performance increase earlier in FY). I guess I've also been waiting to see what happens with rates also since then. I've been moving money around between easy access A/Cs with Atom, Marcus, Chase & Santander depending on rate and also have a fixed saver I took out in March with FCMB via Raisin maturing in a few days. Also have a Vanguard LS 80 which is not exactly going well! Upon maturity of my fixed saver this week I'll have earned ~£550 in interest this FY so over the PSA & will have ~£51k accessible. 

My monthly pension contribution is currently 6% and is unchanged from pre pay rise so I am looking at increasing that though I think I would need to increase it to around 21 to 22% for the remainder of the FY to keep my taxable pay at base level if I wanted to do that...so still likely in the HR band. (More if I am supposed to include child benefit payments as income (2 kids aged 1 & 4))???

I'm willing to lock away money as I don't have any upcoming planned purchases & have previously up to 2yrs - say 40k and keep the remainder in easy access or easy access ISA.

Have been reading the guides and links others have posted but if there are any guides on what to consider when you go from basic to high I'd be interested to read.

I think I am down to a couple of choices for the bulk of the money - Charter Savings Bank 4.38% 2yr Fixed ISA & RCI 4.85% 2yr fixed (non-ISA) however using the guide I think I am better going for the ISA option? (Multiply ISA rate by 1.66) so would need an easy access ~7.25 to beat an ISA - so potentially 'solved' that issue? (Unless operator error)

If I take the 2yr fixed ISA option, As I'm already over the PSA, Do I just need to 'suck it up' regards easy access as I won't be able to open an easy access ISA in addition to fixed? Just take the best rate I can get?

Any guidance (and appreciate its only guidance) appreciated. (Hope above is clear enough - high tendency to waffle)

Qyburn

You say "recently", so only five months of this tax year will be affected.  Could you do a one-off pension contribution just to drop this year below the higher rate threshold while you're deciding what to do longer term?