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18, Self-employed and looking to save.

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After reading the MSE forums for the past week or so, I thought it was about time I joined.

I'm 18yo and operate my own photography business so i'm self-employed, and have roughly £15,000 to put to good use. So i've been browsing about to see what my best options are for my money.

Since then, I've applied for an ICICI HiSave account which I hope to put £10k - £12.5k into for the forseeable future. Wise or not? Are there any risks with these type of accounts?

...and I'm debating whether or not to open an Abbey current account to take advantage of 1 year's 8% interest. which at £2.5k is £200 for a year minus tax of course, Am I right in saying this? Also I read you have to deposit at least £1k a month, so does this have to be by an employer, or could I say for example transfer £1k a month from another current account then transfer it back, or would this be a form of fooling the system and would Abbey allow this?

Anyway hope I wasn't too confusing in my ramblings,
Just looking the best advice from you or what you would recommend on doing with £15k, I'm not really keen on ISA's, especially not when you can have it in the likes of ICICI and have access to it if I ever needed it, where as I don't fancy my money being tied up.

Regards
Mark

Comments

  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    10,000 Posts Combo Breaker
    many / most cash ISAs are instant access so you can withdraw your money if needed and you get interest tax free

    a no brainer really
  • I've learnt something new already, I didn't know you can withdraw your money if needed in an ISA.

    How long do the majority of them last?

    ...and what penalties do they entail if you withdraw money from them early?
  • Lavendyr
    Lavendyr Posts: 2,610 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    I would firstly max out my cash ISA allowance for this year with £3k into Icesave easy-access ISA at 6.1% tax-free.

    The rest I would put into an easy-access savings account, probably again Icesave's at 6.3% since I've heard bad things about ICICI's service.

    Come April I would shift £3.6k (the new tax-free allowance for cash ISAs) from the easy-access account into the ISA thereby sheltering the maximum cash from the taxman (total = £6.3k) while still allowing easy access if needed.

    Edit: to catch your later ISA questions - they last as long as you want to keep them. Most ISAs you can withdraw from at any time, though some require notice. The reason many people say they are more long-term investments is that once you withdraw from them, that money is no longer tax-free. So say you save £3000, then withdraw £1000 - you can't put that £1000 back into an ISA again until the next year. As for penalties, that varies between providers, but the current top ISA rate, Icesave, has no penalties for withdrawal.

    If I wanted to keep the whole sum easy-access, I would not use a regular saver, as these quite often come with penalties for withdrawals (some allow one or two free withdrawals per year). So I'd probably simply leave the rest in an easy-access saver at a reasonably high interest-rate.

    However if I knew I could afford to tie up a chunk of it, I would consider a stocks & shares mini ISA to maximise tax-free gains. Alternatively I would consider putting some into an NS&I index-linked certificate which are for minimum of 3 years but guaranteed to stay ahead of inflation and are also paid tax-free - or using a fixed term deposit account (often called fixed-rate bonds) such as A&L's current fix at 7% for one year.

    Hope that gives you some more food for thought :)
  • Mark2711 wrote: »
    I've learnt something new already, I didn't know you can withdraw your money if needed in an ISA.

    How long do the majority of them last?

    ...and what penalties do they entail if you withdraw money from them early?

    Came to post but noticed Lavendyr gave a great reply. Will just add, worth doing a search on Moneysupermarket for the latest ISA deals.
  • dunstonh
    dunstonh Posts: 119,702 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    You could also consider pensions for a little of the money. As you are self employed, you dont get full state pensions entitlement. You only qualify for the basic state pension which is just £4500 a year. Most self employed individuals dont realise that until its too late. Not a problem for you. Plus you have the increased state retirement age of 68 to deal with as well. So, if you dont fancy going on that long then starting early could be a good thing.

    Whilst you wouldn't dream of putting it all into the pension, putting a small amount or using a regular contribution could help.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Primrose
    Primrose Posts: 10,703 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've been Money Tipped!
    Mark, Cash ISAs can last indefinitely and many of them are easy access and that you can withdraw your money at any time so your money will not be tied up and inaccessible. Ideally the purpose is to keep your money in for a reasonable length of time because once you draw any part of your annual £3000 yearly allowance out in that particularly tax year, you can't replace it. However, if you are a taxpayer, the interest will be free of tax, so it's sensible to use up your £3000 allowance every year (rising to £3600 p.a. from April 2008 when the new tax year starts).
    Being self-employed, you obviously have to put money away for tax liabilities and it may be sensible to keep a separate account for this, as well as having some emergency money in case you are ill and unable to work. Also, you might want to consider putting a part of this money into a stakeholder pension so that you can start building up your pension pot early and get the benefit of long term growth. Any remaining money, once your emergencies are catered for could be put in a Fixed Term Savings Bond at the best rate you can find, or the ICESAVE Easy Access Account. I'd be tempted to stay clear of the stockmarket at the moment. Share prices have dropped and there are probably some bargains to be had if you're investing for the long term future, but as a novice, you're probably safer out of it at the moment and keeping your cash safe.
  • Once again ...thanks for all of the advice, I will be taking a lot of it on board.

    I've already applied for the ICESAVE Easy Access Acount just a few hours ago, so that's a step in the right direction.

    ...and as well as that i've had a nosey around at different ISAs and will probably invest £3,000 in one to see how things blossom.

    ...and far as the pension is concerned I will be definetly looking into that in the near future.

    Thanks for the help.
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