A BIT OF ADVICE PLEASE

Bobby4puddings

Is it worth the wife and I putting £100k into a good easy access savings account I have at 5.08% and sucking up the Personal Tax Allowance, or where else can I put it?
We are both 20% tax payers.
I really don't trust stocks and shares, they seem to much of a risk to me.
Premium bonds and cash ISA's are at there limit.

eskbanker

What do you mean by "sucking up the Personal Tax Allowance" - if you're both paying tax at 20% then you've presumably already used your personal tax allowance (£12,570), or are you perhaps thinking of the personal savings allowance (£1K)?

What are the options you're considering for this £100K, i.e. if you don't put it in easy access savings then what alternatives are you considering?  When are you likely to need access to it?

If you've already maxed PB and ISAs and still have £100K sloshing around then it would seem likely that you have too much in cash deposit form - have you considered putting more into pensions, for example?

dunstonh

I really don't trust stocks and shares, they seem to much of a risk to me.

Although having too much in cash and nothing in alternatives introduces other risks. In particular, shortfall risk and inflation risk.    Even more so if the cash is going to be used to cover your spending in requirements over the years ahead.

MCT56

Just a thought. Split the £100k equally and each have your own an easy access account (if not already). Then in April coming you each open a new isa with £20k. You now have £30k each in the easy access accounts and at least that reduces interest being taxed.  You don’t want to have £100k in one account as only £85k would be protected if the provider went bust. Sorry if this is obvious.

Albermarle

I really don't trust stocks and shares, they seem to much of a risk to me.

Over the last 25 years the global stock markets have produced a return of 425%

A more typical mixed investment that you might have in a pension has grown 225%

Cash savings - 90%

So in fact having too much in cash is the real risk.

friolento

MCT56 said:

Just a thought. Split the £100k equally and each have your own an easy access account (if not already). Then in April coming you each open a new isa with £20k. You now have £30k each in the easy access accounts and at least that reduces interest being taxed.  You don’t want to have £100k in one account as only £85k would be protected if the provider went bust. Sorry if this is obvious.

A joint account has 2 x £85k = £170k FSCS protection. The interest is taxable 50:50 income.

allegro120

Bobby4puddings said:

Is it worth the wife and I putting £100k into a good easy access savings account I have at 5.08% and sucking up the Personal Tax Allowance, or where else can I put it?
We are both 20% tax payers.
I really don't trust stocks and shares, they seem to much of a risk to me.
Premium bonds and cash ISA's are at there limit.

In my personal opinion FSCS protected 5.08% is much better option than the risk attached to S&S.  If it's a joint account £100k should be fine, if it is single I would split it between two accounts in order not to exceed £85 per institution protection.

Bobby4puddings

Thanks for all your replies.
My thoughts are, and correct me if my math's or method is wrong.
If I put £100k into a joint easy saving account at 5.08% that means I we would get £5080 interest per year. If we are taxed the 20% PSA on this we would pay £616 tax and would reduce the interest to £2464.
Surely this is better than nothing.

Dazed_and_C0nfused

Bobby4puddings said:

Thanks for all your replies.
My thoughts are, and correct me if my math's or method is wrong.
If I put £100k into a joint easy saving account at 5.08% that means I we would get £5080 interest per year. If we are taxed the 20% PSA on this we would pay £616 tax and would reduce the interest to £2464.
Surely this is better than nothing.

From a "profit" perspective you need to weigh up if taxable income beats tax exempt income.

5.08% in a taxable account beats 4.00% in a cash ISA even if all the taxable interest is taxed at 20%.

Don't follow your figures though.

If neither of you have any Personal Allowance or savings starter rate band available but do you have the full £1,000 savings nil rate band (aka PSA) then the £2,540 you would each receive would include tax liability of £308.  Leavings £2,232 net of tax.

£1,000 x 0% = £0.00
£1,540 x 20% = £308.00

£2,540 less £308 = £2,232

Albermarle

Bobby4puddings said:

Thanks for all your replies.
My thoughts are, and correct me if my math's or method is wrong.
If I put £100k into a joint easy saving account at 5.08% that means I we would get £5080 interest per year. If we are taxed the 20% PSA on this we would pay £616 tax and would reduce the interest to £2464.
Surely this is better than nothing.

Of course it is better than nothing. The question is how much would it be if it was invested instead? 
Plus easy access rates are likely to drop during this year.

Qyburn

Bobby4puddings said:

My thoughts are, and correct me if my math's or method is wrong.
If I put £100k into a joint easy saving account at 5.08% that means I we would get £5080 interest per year. If we are taxed the 20% PSA on this we would pay £616 tax and would reduce the interest to £2464.

Asuming you both have the PSA available then £2,000 will be tax free (or 0% tax), the other £3,080 taxed at 20% giving a total of £4,464 after tax.