Savings Options on £300k for 2 years

i60271210

I am selling my home and expect to receive £300,000. Initially, the plan was to use this money, along with my partner contributing equally, to purchase a new property together. However, we’re not sure we want to make that commitment right now and would prefer to wait a couple of years to see how things develop.

Having secured a buyer for my property and viewed other houses, I would like to go ahead with the sale.
My partner is purchasing a house in their sole name, where we will both live, while I sell my house and put the £300,000 into safe, low-risk savings accounts to get the best return possible. In around two years, I’ll review the situation.

I am a basic-rate taxpayer and live in England. What do people think are the best options for me?

born_again

https://www.moneysavingexpert.com/banking/

Spread it around the best ones.

Newbie_John

How basic tax rate are you?
Putting it to 4% savings account will make £12k - so if you earn £38k it may take you to 40% rate..

The lowest risk would be to put all of it to some nsandi bonds of 4%.

Then to improve tax efficiency if it may affect you - premium Bonds £50k, max your ISA £20k, also you could double your pension contribution and just live of the extra money you have - then stop paying pension for 2 years after 2 years (so in 4 years it will be the same)

£12k interest with 20% tax will still leave you with £9600.

ColdIron

Reasonable if not table topping rates but 100% secure so no splitting it up into £85k chunks

https://www.nsandi.com/products

i60271210

Newbie_John said:

How basic tax rate are you?
Putting it to 4% savings account will make £12k - so if you earn £38k it may take you to 40% rate..

The lowest risk would be to put all of it to some nsandi bonds of 4%.

Then to improve tax efficiency if it may affect you - premium Bonds £50k, max your ISA £20k, also you could double your pension contribution and just live of the extra money you have - then stop paying pension for 2 years after 2 years (so in 4 years it will be the same)

£12k interest with 20% tax will still leave you with £9600.

I earn a basic salary of £30k per year.

I’ve calculated the net returns from a 2-year savings plan, splitting £85k across different financial institutions. The breakdown is as follows:

• Close Savings and Castle Community Bank, both offering 4.58%

• Cynergy Bank and Oxbury Bank, both offering 4.53%

• One ISA bond for £20k at 4.3%

After two years, I’ve estimated a net interest of around £24k.

Does this look like the best approach?

I haven’t yet checked the potential returns from Premium Bonds.

i60271210

ColdIron said:

Reasonable if not table topping rates but 100% secure so no splitting it up into £85k chunks

nsandi

Thanks, will they guarantee over £85k in the same financial institution? 

Newbie_John

Premium bonds have some risk - but only towards interests - you may end up with £0, you may end up with £1mln but most likely close to 3%.

It's gov protected, fully tax free.

And regarding your interests - really depends when £24k is paid - if all in one year then it will push you to 40% rate, if yearly at £12k then you should be fine

ColdIron

i60271210 said:

ColdIron said:

Reasonable if not table topping rates but 100% secure so no splitting it up into £85k chunks

nsandi

Thanks, will they guarantee over £85k in the same financial institution? 

They don't have FSCS protection because they don't need it as an executive arm of HM Treasury. Guaranteed up to £1,000,000 or £2,000,000 depending upon the account
https://www.nsandi.com/get-to-know-us/why-nsandi

lr1277

Savings interest outside an ISA are taxable. With the accounts you mentioned, I don't know how often the interest is paid nor where it is paid to e.g. your linked current account.

Once HMRC are aware you have undeclared income, there are 2 ways forward.

You  can submit a tax return and pay your taxes that way

Or

HMRC will adjust your tax code on your salary so you end up getting less net salary.

Make sure the interest is accessible either to pay the tax bill or make up the shortfall in your income if HMRC change your tax code.

In my mum's case, HMRC knew she submitted an annual tax return. Yet they still changed her tax code 4 times in as many months, each time reducing her net income. I hope it will all be sorted out on the submission of her next tax return, but each tax code change worried my mum because her net income kept reducing.

As I said I don't know what products you mentioned but for certain fixed rate products of more than 1 year's duration, the interest is paid at the end of the term. Yet HMRC think you have received the interest so expect you to pay tax on it either by submitting a return or changing your tax code.

Eyeful

Opions you might like to consider:

1. NS&I : 100% safe (you are loaning money to the UK government).

2. Temporary High Balance Protection: 
https://www.fscs.org.uk/making-a-claim/claims-process/temporary-high-balances/

3. Spread the money around Banks & Building Societies, that are on the FSCS Savings Protections List. .
https://moneyfactscompare.co.uk/savings-accounts/

4. Use tax shelters wherever possible.
Examples:
Cash ISA's
S&S ISA'S
Pensions

Remember:
FSCS SAVINGS PROTECTION: Only applies to Banks, Building Societies, on their list, so always check:
(a) https://www.fscs.org.uk/check/check-your-money-is-protected/

MSE Savings Safe Checker is half way down the page
(b) https://www.moneysavingexpert.com/savings/safe-savings/

Bigwheels1111

Please stop looking at the 85k limit as your protection.

Great the 85k is safe and sound. Close Savings 4.58%.

On 85k that's £3893.00 interest, who pays that if they go under ?.

Nobody as its over the 85k limit.

81k @ 4.58% = £84,709.80, All safe and protected provided you take an annual payout.