What to do with money from house sale short term

cse4921

Hi everyone.

First and foremost thank you to anyone that responds to this with advice constructive or not. It's much appreciated. 

Myself and my partner out selling our property and we are going to move in with family for a short time once the property is sold (maybe 2-3 months) so that we can take our time finding the right property for us location wise etc.. 

As a result of this we will have money from the house sale (about 35k) that we we need to put away for a short period of time. 

We move out in May this year so will both have a renewed 20k ISA allowance which I'm thinking of just putting all the money in. However if we split the money in half and both put it into both our ISAs (17.5k) then we only have 2.5k remaining each for the rest of the tax year before we will incur tax on the interest earned.

For context we will both save more than 2.5k each this year as we won't be paying bills when with family so able to save extra plus we are regular savers anyway.

Therefore I was thinking of putting 10k away in premium bonds with the remaining 25k split between our ISAs (so 12.5k each leaving 7.5k left of our ISA allowance between us for the rest of the year)

I guess the question would be, does this seem like a sensible option or has anyone else done the same or something different? Any help would be appreciated  

horsewithnoname

Depends if you win on the premium bonds I suppose, which is impossible to know. 

You might be able to beat the expected rate on the PBs even with paying (assuming) 20% tax on some of your interest. 

As Dirty Harry said,  Do you feel lucky?

Albermarle

This thread would have been better here.
Savings & investments — MoneySavingExpert Forum

If you are a 20% taxpayer, you will not pay tax on any interest earned below £1000 outside an ISA .
Unlikely from only £2.5K saved outside an ISA.

mlz1413

I had a 2 month gap between sale and purchase even though I started the process on both at the same time. So if you are taking a 2 month gap and then starting the buying process you could have your money in savings many months.

If you put in an ISA ensure you don't lose out with penalties if you take out during the year.

Personally I'd use up the ISA allowance each and then save into premium bonds.

I assume once you withdraw the money for a house purchase you won't need the allowance again this year as you won't have a lump sum and won't be savings monthly once you own a property again.

Sapindus

I thought about premium bonds when I was in a similar situation.  I even took out a tiny amount just to stop me wanting to buy a lottery ticket.  But the thought that I could end up with no return at all swung me back to taking out ordinary savings accounts over and above what I could put into an ISA, and just pay the tax on the interest.

FlorayG

When I was in a similar situation 3 years ago I put the maximum allowed into Premium Bonds for about 12 months and worked out afterwards that my winnings ( almost every month)gave me 5% interest - with, of course, always the remote chance of winning big ( I didn't  )

penners324

Easiest option looks to be putting it in a good interest joint savings account.

Marcus Poland Coventry Building Society offer these products among other banks

Albermarle

mlz1413 said:

I had a 2 month gap between sale and purchase even though I started the process on both at the same time. So if you are taking a 2 month gap and then starting the buying process you could have your money in savings many months.

If you put in an ISA ensure you don't lose out with penalties if you take out during the year.

Personally I'd use up the ISA allowance each and then save into premium bonds.

I assume once you withdraw the money for a house purchase you won't need the allowance again this year as you won't have a lump sum and won't be savings monthly once you own a property again.

You only get penalised for withdrawing early from fixed rate/fixed term savings accounts, whether in an ISA or not.
If you have an easy access Cash ISA, or an easy access non ISA account, there will be no penalties.

Easiest option looks to be putting it in a good interest joint savings account.

It could well be, but for clarity you can not have a joint cash ISA ( I stands for individual). So it would have to be a joint non ISA savings account. So depending on the amounts involved, the interest rate and the time span, there maybe enough interested generated that some tax will be payable. 
With a joint account, interest is allocated 50:50 for tax purposes, so each individual allowances could be used.

Yorkie1

You can replace money in a flexible cash ISA in the same tax year