Large lump sum savings best options.... and associated tax?

aberamanboy

Hi all

I had a quick look at the sticky regards easy access savings accounts:
https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/?_gl=1*8go89e*FPAU*MTY0MDMzNTQ5Ni4xNzMzNTY4NjM5*_ga*MjA2MTIzNDIxOC4xNzMzNTY4NjM4*_ga_X74CWQS9F0*MTczMzU2ODYzNy4xLjEuMTczMzU3MDExNy4wLjAuMjAyOTM4MjYxMg..

I have a 6 figure sum to bank for 3 to 6 months. It will be at least 3 months, then probably should be easy access thereafter as I will need to buy a house out of it at some point.

If I go for Plum or Oxbury per above links, what do I need to be aware of regards tax on the income from these savings?

Are there any other options for maximising the income and minimising income tax over this short period?

Appreciate your thoughts.

Thank you.

Dazed_and_C0nfused

aberamanboy said:

Hi all

I had a quick look at the sticky regards easy access savings accounts:
https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/?_gl=1*8go89e*FPAU*MTY0MDMzNTQ5Ni4xNzMzNTY4NjM5*_ga*MjA2MTIzNDIxOC4xNzMzNTY4NjM4*_ga_X74CWQS9F0*MTczMzU2ODYzNy4xLjEuMTczMzU3MDExNy4wLjAuMjAyOTM4MjYxMg..

I have a 6 figure sum to bank for 3 to 6 months. It will be at least 3 months, then probably should be easy access thereafter as I will need to buy a house out of it at some point.

If I go for Plum or Oxbury per above links, what do I need to be aware of regards tax on the income from these savings?

Are there any other options for maximising the income and minimising income tax over this short period?

Appreciate your thoughts.

Thank you.

Utilise an ISA as much as possible.

And as we are in December and you mention 3-6 months looks at which tax year you want the interest to be paid.  

Your choice of account(s) will determine if interest is received in 2024-25, 2025-26 or a bit in both tax years.

aberamanboy

Thank you. I assume your advice regards ISA's is because these are tax free up to a limit? Can multiple ISA's be used or does the tax free limit apply to total savings regardless of number of accounts it is saved in?

Dazed_and_C0nfused

aberamanboy said:

Thank you. I assume your advice regards ISA's is because these are tax free up to a limit? Can multiple ISA's be used or does the tax free limit apply to total savings regardless of number of accounts it is saved in?

Yes, ISA's are exempt from tax and providing you stock to the rules you don't need to tell HMRC anything about them.

You can have multiple ISA's but there is an overall limit (per tax year) that each person can add to ISA's.

aberamanboy

Do you know where I need to look to find out what the value limit is please?

Edit: Looks like the limit is £20k?.... I guess my six figure sum is going to get taxed one way or another then (income)?

aberamanboy

Also, where to look for details of tax applicable to regular easy access savings interest?

Dazed_and_C0nfused

aberamanboy said:

Do you know where I need to look to find out what the value limit is please?

https://forums.moneysavingexpert.com/discussion/6290021/isas-tax-free-savings-sticky#latest

Good place to start

Dazed_and_C0nfused

aberamanboy said:

Also, where to look for details of tax applicable to regular easy access savings interest?

https://www.litrg.org.uk/savings-property/tax-savings-and-investments/tax-savings-income

aberamanboy

Thanks again.

Not much the wiser after reading that though. Looks like, as a result of having a job, income tax is applicable on all of the savings. The info mentions banding for the rate at which tax is paid. I assume any interest is added to my income received from employment and the applicable percentage applied to it i.e. 40%?

incus432

You can earn up to 1000 interest free of tax if you are in the 20% tax band, but only 500 if you pay 40%

Bobziz

If you can leave it for 7 months then a single gilt in a general investment account might work.