Where to put my savings?

laurenc92

I currently have around £30,000 saved with my partner. We are saving to move house but that won’t be for atleast 2 years. I was looking to move around £20,000 into an account that I won’t need to touch until we look to buy a house. I’m a bit clueless as to what kind of account would make the most sense? Would a fixed account be the best option? Thank you in advance! 

Stubod

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

RobM99

Over 4% for a two year bond, but be mindful of interest tax.

laurenc92

RobM99 said:

Over 4% for a two year bond, but be mindful of interest tax.

Thanks so much for your reply! Anyway to avoid the tax?

Albermarle

There are allowances for certain amounts of interest you can earn before paying any tax on it.

What is the personal savings allowance? (moneysavingexpert.com)
Tax-free savings: check if you're eligible - Money Saving Expert

Alternatively you can save with a Cash ISA account. No tax to pay on any interest but you can not add more than £20K pa and usually the ISA interest rate is below non ISA accounts.

Compare The Best UK Savings Accounts | moneyfacts.co.uk

TiVo_Lad

laurenc92 said:

Thanks so much for your reply! Anyway to avoid the tax?

There is some useful information here: https://www.gov.uk/apply-tax-free-interest-on-savings

It will ultimately depend on the individual circumstances of you and your partner, but there may be tax benefits of moving the savings into the name of the lowest earner. You'll need to crunch the numbers to work out wht's the best option for you.

Notepad_Phil

laurenc92 said:

RobM99 said:

Over 4% for a two year bond, but be mindful of interest tax.

Thanks so much for your reply! Anyway to avoid the tax?

In addition to the above answers, there is also the possibility that with a non-ISA bond the interest will be reported to the HMRC as being paid all in one go on the maturity of the bond. In such a case, the 4% interest on £20,000 on a two year non-ISA bond would mean breaking the £1,000 (or possibly less) Personal Savings Allowance from just that one account when the interest is paid at the two year maturity, so depending on your income that could mean that you have to pay tax on a chunk of that interest regardless of what other savings interest you also receive.

Perhaps the easiest way to get around that specific problem (other than to open an ISA) is to make sure that you choose an account where you can get the interest paid out of the account on a monthly or annual basis, in which case you can choose one of those options so that the reporting to the HMRC is defined by what ever option you choose.