Savings Account Fixed Term / Cash ISA Advise

darksnake09

Hello,

I am a newbie to investing so do not have much knowledge on this matter. Any advise would be appreciated as I would like to start soon.

I wanted to know apart from the exempted tax on a cash isa vs a fixed term savings account (which there is a tax on after £1000) if salary is below £50k I believe, is there anything more difference between these two?

 

Would it be better to have the profit paid monthly or yearly from a fixed savings to avoid the limit before tax running into 2024/25? As I understand that for example if I open an account lets say in December it will only run into the tax year being April 2024 but under a 2 year fix would the profit be counted within the £1000 bracket before tax for savings?

I have looked at a bank called gatehousebank and there returns seem pretty good.

Any other tips would be helpful too

Thanks in advance

Blugosi

darksnake09 said:

Hello,

I am a newbie to investing so do not have much knowledge on this matter. Any advise would be appreciated as I would like to start soon.

I wanted to know apart from the exempted tax on a cash isa vs a fixed term savings account (which there is a tax on after £1000) if salary is below £50k I believe, is there anything more difference between these two?

 

Would it be better to have the profit paid monthly or yearly from a fixed savings to avoid the limit before tax running into 2024/25? As I understand that for example if I open an account lets say in December it will only run into the tax year being April 2024 but under a 2 year fix would the profit be counted within the £1000 bracket before tax for savings?

I have looked at a bank called gatehousebank and there returns seem pretty good.

Any other tips would be helpful too

Thanks in advance

Careful with fixes over 1 year . Some stipulate that although interest is added  annually ,it is only payable at maturity. So all interest accrued would be  liable for tax in the tax year of that maturity date of the deposit 
Monthly interest will obviously on a monthly basis be available  for withdrawal. You don't have to withdraw, but have that option.   It therefore will count as part of you current tax year for all payments that fall in that period. So a deposit straddling 2 tax periods would be split  between them . Be aware that monthly interest will be lower than the headline rate . For example a 1 year fixed deposit at 6% with option for monthly interest. The interest you receive will not be at 6% because as you are getting 11 of the 12 interest payments earlier than the maturity date the rate would be less to compensate for the compounding effect. 

eskbanker

darksnake09 said:

I am a newbie to investing so do not have much knowledge on this matter. Any advise would be appreciated as I would like to start soon.

Firstly a terminology point to minimise any confusion - investing normally refers to buying shares, etc, whereas saving is the usual term for cash deposit accounts.

Have you recently acquired a significant sum or are you just hoping to start putting small amounts away?  If the former, then it would be worth clarifying the approximate amount involved, but if the latter then annual allowances are much less likely to come into play and the likes of regular saver accounts may be a better fit than for other scenarios....

darksnake09

Blugosi said:

darksnake09 said:

Hello,

I am a newbie to investing so do not have much knowledge on this matter. Any advise would be appreciated as I would like to start soon.

I wanted to know apart from the exempted tax on a cash isa vs a fixed term savings account (which there is a tax on after £1000) if salary is below £50k I believe, is there anything more difference between these two?

 

Would it be better to have the profit paid monthly or yearly from a fixed savings to avoid the limit before tax running into 2024/25? As I understand that for example if I open an account lets say in December it will only run into the tax year being April 2024 but under a 2 year fix would the profit be counted within the £1000 bracket before tax for savings?

I have looked at a bank called gatehousebank and there returns seem pretty good.

Any other tips would be helpful too

Thanks in advance

Careful with fixes over 1 year . Some stipulate that although interest is added  annually ,it is only payable at maturity. So all interest accrued would be  liable for tax in the tax year of that maturity date of the deposit 
Monthly interest will obviously on a monthly basis be available  for withdrawal. You don't have to withdraw, but have that option.   It therefore will count as part of you current tax year for all payments that fall in that period. So a deposit straddling 2 tax periods would be split  between them . Be aware that monthly interest will be lower than the headline rate . For example a 1 year fixed deposit at 6% with option for monthly interest. The interest you receive will not be at 6% because as you are getting 11 of the 12 interest payments earlier than the maturity date the rate would be less to compensate for the compounding effect. 

exactly what I was a little confused about but you have answered it now, thanks for that, so the bank I am looked at do state that the interest is only payable at 'maturity', so basically if I was to open a 1 year fixed account now, the interest from this month (November) will merge into November 2024 as the new tax year would have started which would mean a 1 year, so it could go over the 1k limit.

would it be better just to start fresh from next april ?

Albermarle

I wanted to know apart from the exempted tax on a cash isa vs a fixed term savings account (which there is a tax on after £1000) if salary is below £50k I believe, is there anything more difference between these two?

Cash ISA can be easy access, fixed term, notice account etc , just the same as with non ISA accounts.

The difference is that interest earned in a cash ISA is always free from tax, and you are limited to adding £20K per tax year. Interest earned in non ISA accounts can be taxed depending on how much interest you get and your income. Usually the rate of interest for equivalent accounts is a little lower for the cash ISA than a non ISA, but this can vary.

Have a good read of this.

Savings - All Guides - MoneySavingExpert

Albermarle

Careful with fixes over 1 year . Some stipulate that although interest is added  annually ,it is only payable at maturity. So all interest accrued would be  liable for tax in the tax year of that maturity date of the deposit 

There are a number of threads on the forum on this topic. There are some differences between theory and practice. 

When you pay tax on savings, just spoken to HMRC — MoneySavingExpert Forum

Blugosi

Google  SAIM 2440
its gives different scenarios for when interest should be declared for tax purposes 

Angelica123

darksnake09 said:

Blugosi said:

darksnake09 said:

Hello,

I am a newbie to investing so do not have much knowledge on this matter. Any advise would be appreciated as I would like to start soon.

I wanted to know apart from the exempted tax on a cash isa vs a fixed term savings account (which there is a tax on after £1000) if salary is below £50k I believe, is there anything more difference between these two?

 

Would it be better to have the profit paid monthly or yearly from a fixed savings to avoid the limit before tax running into 2024/25? As I understand that for example if I open an account lets say in December it will only run into the tax year being April 2024 but under a 2 year fix would the profit be counted within the £1000 bracket before tax for savings?

I have looked at a bank called gatehousebank and there returns seem pretty good.

Any other tips would be helpful too

Thanks in advance

Careful with fixes over 1 year . Some stipulate that although interest is added  annually ,it is only payable at maturity. So all interest accrued would be  liable for tax in the tax year of that maturity date of the deposit 
Monthly interest will obviously on a monthly basis be available  for withdrawal. You don't have to withdraw, but have that option.   It therefore will count as part of you current tax year for all payments that fall in that period. So a deposit straddling 2 tax periods would be split  between them . Be aware that monthly interest will be lower than the headline rate . For example a 1 year fixed deposit at 6% with option for monthly interest. The interest you receive will not be at 6% because as you are getting 11 of the 12 interest payments earlier than the maturity date the rate would be less to compensate for the compounding effect. 

exactly what I was a little confused about but you have answered it now, thanks for that, so the bank I am looked at do state that the interest is only payable at 'maturity', so basically if I was to open a 1 year fixed account now, the interest from this month (November) will merge into November 2024 as the new tax year would have started which would mean a 1 year, so it could go over the 1k limit.

would it be better just to start fresh from next april ?

What do you mean by start fresh from next April? If you wait until April to get a fixed - a) the interest is likely to be lower than it is now and b) if you were still at risk of earning over 1k worth of interest - moving it to the next tax year is unlikely to make a huge difference. The important thing is that you start earning interest on the money now! 

Also, there's nothing stopping you from using a combination of ISAs, easy access, fixed-rate bonds and regular savers depending on your needs. It would be worth reading the MSE savings guide posted above to get to grips with your options. 

darksnake09

Angelica123 said:

darksnake09 said:

Blugosi said:

darksnake09 said:

Hello,

I am a newbie to investing so do not have much knowledge on this matter. Any advise would be appreciated as I would like to start soon.

I wanted to know apart from the exempted tax on a cash isa vs a fixed term savings account (which there is a tax on after £1000) if salary is below £50k I believe, is there anything more difference between these two?

 

Would it be better to have the profit paid monthly or yearly from a fixed savings to avoid the limit before tax running into 2024/25? As I understand that for example if I open an account lets say in December it will only run into the tax year being April 2024 but under a 2 year fix would the profit be counted within the £1000 bracket before tax for savings?

I have looked at a bank called gatehousebank and there returns seem pretty good.

Any other tips would be helpful too

Thanks in advance

Careful with fixes over 1 year . Some stipulate that although interest is added  annually ,it is only payable at maturity. So all interest accrued would be  liable for tax in the tax year of that maturity date of the deposit 
Monthly interest will obviously on a monthly basis be available  for withdrawal. You don't have to withdraw, but have that option.   It therefore will count as part of you current tax year for all payments that fall in that period. So a deposit straddling 2 tax periods would be split  between them . Be aware that monthly interest will be lower than the headline rate . For example a 1 year fixed deposit at 6% with option for monthly interest. The interest you receive will not be at 6% because as you are getting 11 of the 12 interest payments earlier than the maturity date the rate would be less to compensate for the compounding effect. 

exactly what I was a little confused about but you have answered it now, thanks for that, so the bank I am looked at do state that the interest is only payable at 'maturity', so basically if I was to open a 1 year fixed account now, the interest from this month (November) will merge into November 2024 as the new tax year would have started which would mean a 1 year, so it could go over the 1k limit.

would it be better just to start fresh from next april ?

What do you mean by start fresh from next April? If you wait until April to get a fixed - a) the interest is likely to be lower than it is now and b) if you were still at risk of earning over 1k worth of interest - moving it to the next tax year is unlikely to make a huge difference. The important thing is that you start earning interest on the money now! 

Also, there's nothing stopping you from using a combination of ISAs, easy access, fixed-rate bonds and regular savers depending on your needs. It would be worth reading the MSE savings guide posted above to get to grips with your options. 

Stating start fresh I meant to start in April 2024 rather than December 2023 so the 1 year fixed would end dead on 2025 April, but your comments make sense and I will sure have a look at the guide. thank you

Blugosi

Metro bank are top payers at the moment at 5.8% fixed for 1 yeardarksnake09 said:

Angelica123 said:

darksnake09 said:

Blugosi said:

darksnake09 said:

Hello,

I am a newbie to investing so do not have much knowledge on this matter. Any advise would be appreciated as I would like to start soon.

I wanted to know apart from the exempted tax on a cash isa vs a fixed term savings account (which there is a tax on after £1000) if salary is below £50k I believe, is there anything more difference between these two?

 

Would it be better to have the profit paid monthly or yearly from a fixed savings to avoid the limit before tax running into 2024/25? As I understand that for example if I open an account lets say in December it will only run into the tax year being April 2024 but under a 2 year fix would the profit be counted within the £1000 bracket before tax for savings?

I have looked at a bank called gatehousebank and there returns seem pretty good.

Any other tips would be helpful too

Thanks in advance

Careful with fixes over 1 year . Some stipulate that although interest is added  annually ,it is only payable at maturity. So all interest accrued would be  liable for tax in the tax year of that maturity date of the deposit 
Monthly interest will obviously on a monthly basis be available  for withdrawal. You don't have to withdraw, but have that option.   It therefore will count as part of you current tax year for all payments that fall in that period. So a deposit straddling 2 tax periods would be split  between them . Be aware that monthly interest will be lower than the headline rate . For example a 1 year fixed deposit at 6% with option for monthly interest. The interest you receive will not be at 6% because as you are getting 11 of the 12 interest payments earlier than the maturity date the rate would be less to compensate for the compounding effect. 

exactly what I was a little confused about but you have answered it now, thanks for that, so the bank I am looked at do state that the interest is only payable at 'maturity', so basically if I was to open a 1 year fixed account now, the interest from this month (November) will merge into November 2024 as the new tax year would have started which would mean a 1 year, so it could go over the 1k limit.

would it be better just to start fresh from next april ?

What do you mean by start fresh from next April? If you wait until April to get a fixed - a) the interest is likely to be lower than it is now and b) if you were still at risk of earning over 1k worth of interest - moving it to the next tax year is unlikely to make a huge difference. The important thing is that you start earning interest on the money now! 

Also, there's nothing stopping you from using a combination of ISAs, easy access, fixed-rate bonds and regular savers depending on your needs. It would be worth reading the MSE savings guide posted above to get to grips with your options. 

Stating start fresh I meant to start in April 2024 rather than December 2023 so the 1 year fixed would end dead on 2025 April, but your comments make sense and I will sure have a look at the guide. thank you

Metro Bank are the top payers of 1 year fixed at 5.8% They give you the option of monthly interest or at maturity .
If you invested now on the monthly interest basis you first 4 interest payments (Dec,Jan,Feb,March) would fall into the tax year April 2023/2024  with the remaining 8 liable for possible taxation April 2024/2025.
So basically you have to do your sums and find the most tax efficient ( meaning paying the least  possible!) way of investing your funds.

Albermarle

Blugosi said:

Google  SAIM 2440
its gives different scenarios for when interest should be declared for tax purposes 

If you read the linked thread, you will see that many savings providers just report interest to HMRC annually, and HMRC record the interest annually, regardless of what sort of account it is, how long the fixed term is, or when the interest is actually available. This is regardless of what Google, MSE's own advice and even what HMRC's rules say.

As most people do not report their own interest to HMRC, then this annual reporting is what apparently happens in practice, even though in theory it should not.