£40K in savings after house sale

MrRichard1986

Hi all, ive just sold my property and now have £40K in my account. My original plan was to purchase a new property but with the high interest rates ive decided to wait for mortgage to drop if they do. So ive placed £20k in a fixed isa for 12 months @4.2% interest this is the max allowance under the PSA so my question is what should i do with the rest? any recommendations

Dazed_and_C0nfused

MrRichard1986 said:

Hi all, ive just sold my property and now have £40K in my account. My original plan was to purchase a new property but with the high interest rates ive decided to wait for mortgage to drop if they do. So ive placed £20k in a fixed isa for 12 months @4.2% interest this is the max allowance under the PSA so my question is what should i do with the rest? any recommendations

I think you are very confused.

Interest from an ISA is tax exempt, it is completely irrelevant as far as your income tax liability is concerned.

£20k is the most you can add to an ISA (per tax year).

InvesterJones

Interest in an ISA doesn't count towards your PSA.

As for the remaining 20K, depending on how long you want to wait and what tax band you're in, premium bonds or individual gilts might be an option - or just a normal savings account - fixed rates might be best for the next 12 months, even after tax.

eskbanker

MrRichard1986 said:

ive placed £20k in a fixed isa for 12 months @4.2% interest this is the max allowance under the PSA

The Personal Savings Allowance has nothing to do with interest from ISAs as the whole point of ISAs is that they're tax-free!

Now that you've used your full ISA allowance for the year, you can put the remaining £20K into a taxable account, and even if it earns 5% over the next 12 months, that would still fit within the PSA, although it's generally better to consider the matter in the round and maximise net return rather than trying to avoid tax as such....

Bigwheels1111

That's a kick in the teeth 4.2%, Trading 212 easy access ISA is 5.17% today.

It can go up and down, but its 25% higher rate than you fixed at.

4.6% fixed for 1 year is 10% better than you took out.

https://moneyfactscompare.co.uk/isa/1-year-fixed-rate-isas/

20K in Trading 212 isa.

20k in Chip easy access 5%.

Move if rate drops.

https://moneyfactscompare.co.uk/savings-accounts/easy-access-savings-accounts/

TheSpectator

Where are these 'high interest rates' you speak off? Although they might come down slightly this is the new normal (actually the old normal).

Any potential interest rate saving is likely to be swallowed up by property price increases.

MrRichard1986

Sorry all i wrote PSA as i was reading about that as i wrote the message i meant ISA allowance being £20K which is what ive done so far

Beddie

Take it back out of the fixed ISA, if you are still within the cooling off period, and put into an easy access account instead.

You'll get a bit less interest, so why am I suggesting that? What if the right house comes up and you want to buy it? You need the flexibility to make your move when you see something you like. Mortgage rates will be dropping, but house prices will keep going up and stamp duty changes are afoot too.

But if you are sure you won't move in the next 12 months then "as you were."

keith2215

Beddie said:

Take it back out of the fixed ISA, if you are still within the cooling off period, and put into an easy access account instead.

You'll get a bit less interest, so why am I suggesting that? What if the right house comes up and you want to buy it? You need the flexibility to make your move when you see something you like. Mortgage rates will be dropping, but house prices will keep going up and stamp duty changes are afoot too.

But if you are sure you won't move in the next 12 months then "as you were."

By Law you can close any ISA anytime however there will be a penalty loss of interest.