How best to spread savings 9 March at 9:26PM in Savings & investments 2 replies 358 views

Cheillie2020

Hi there, 
Im just looking for some advice. 

I am a director of my own Ltd company of which i take a basic salary £12500 which is topped up by dividends of around £37500 to just below £50k. 

I have £85k in a 2 ur Fixed Interest saving account which I setup in October last year, generates £320 per month. 

First question is, I’m guessing I’ll pay some tax on this when I come to do my self assessment for 22-23. If so can anyone give me an idea of how much / how it’s calculated. I know there’s some interest that can be tax free? 

My next question is, I’m tempted to setup a Virgin Money 2yr fixed isa in the coming days and deposit £20k in this tax year. 

Then, deposit a further £20k after April 6th. (Virgin give a 30 day window to fund). 

I’m doing this basically to gain as much interest as possible but avoid paying any more tax on savings so don’t want to open another fixed savings account. 

Can anyone think of a better way to do this or if I’m missing something? 

The Virgin Fixed ISA is 4.11% so would return approx £137 per month for 2 years from opening with £40k in it, is that correct? I’ve never opened an isa before. 

Thanks for help in advance. 

Band7

Assuming your savings are personal rather than business, your plan to move £20k into an ISA now, and another £20k into the same or different ISA after April 5 is sound. Choose the best paying one.

Depending on what your plans are for your cash, you could also make some further pension contributions.

The amount of tax you pay on your savings interest depends on your tax band. It sounds as if you are keeping your income carefully in the basic rate tax band BUT your non-ISA interest also counts as taxable income, so you might slide into HR tax. If so, you only have £500 interest at 0% tax, and need to pay 40% tax on interest above £500. If you manage to keep in the BR band, you have £1,000 of interest at 0% tax, and need to pay 20% tax on interest above £1,000. Watch out for any updates in Wednesday's budget.

Albermarle

Hopefully you are not just relying on cash savings for your personal finances, as they are vulnerable to inflation, especially at the moment, and have also long term investments in place, especially a pension?