Help! Don't want to be a loser...

AliBongo81

Hi,

I am saving for my own house, and currently have a couple of grand saved in a Nationwide Cashbuilder account. From now on I'll be saving £500 a month, so I decided to look into opening a new savings account to transfer my money into, and pay into every month, but the advice on here while helpful confused me slightly!

My Cashbuilder account was on the list of "losing accounts", so I definitely need to switch, but which savings account would be the best for me to change to? I won't be withdrawing any of the money, so I'm just looking for one with decent interest and no hidden surprises.

Hope someone can help!

Thanks,
Ali

debbie42

If it's a regular £500 each month then you could look at the Halifax Regular Saver at 10%.

What is your tax position? It's worth looking into ISAs if you haven't already used your alllowance.

AliBongo81

Thanks Debbie - I had been looking at that one but wasn't sure as some people in other threads said it would be better to get one with a lower but fixed interest rate. I pay basic tax. I don't have an ISA, this was an option I was wondering about too but I don't know enough about them to make a decision!

As I will hopefully only be saving at this rate for a maximum of a year (by then I hope to have a house), what would happen with the Halifax 10% account after this period? Is it ok to close it down then or better to keep it open and just put a smaller amount in per month?

As you can probably see I am a bit clueless about all things financial!

Once again thank you for your help!

AliBongo81

Sorry - another question - as it says you cannot withdraw any money from the Halifax 10% saver, would this be the best choice given that I may be in a position to put down a deposit on a house before the 12 month period is up?

Baldur

AliBongo81 wrote: »

I don't have an ISA, this was an option I was wondering about too but I don't know enough about them to make a decision!

Cash ISAs are just like any other savings account except that there is an annual (6th April to 5th April each year) limit, currently amounting to £3,600, on new money which can be paid into them - the capital & interest within a Cash ISA remains tax free until it is closed or withdrawn.

debbie42

You wouldn't want to use the Halifax RS if you may want to withdraw before the 12 months, no. That account has all its funds transferred to the nominated account at the end of 12 months. It is a good rate, and beats all ISAs I've seen, for basic rate tax payers, but you can't get at your funds before the 12 months, or the interest drops to a much lower one.

If you are a basic rate tax payer then you pay 20% tax on any interest, normally at source. With an ISA you don't pay any tax. So to compare a savings account with an ISA you need to take this into account.

For example, the Halifax 10% is worth 8% after tax, which is a pretty good rate, but has restrictions.

If you put your allowance (£3600 p.a.) in an ISA that is paying, say, 6%, then you'd need to find a normal savings account paying 7.5% to have the same effective rate. ISAs are a very tax efficient way of saving, so look at those first.

AliBongo81

That's fantastic - thank you. I think I will transfer my current savings into an ISA and pay into that until it reaches £3, 600, then open a new savings account to pay subsequent monthly payments into. As I am now looking to find one with a good interest rate but allowing me to withdraw at any time - do you have any suggestions which might be the best one around at the moment?

Many many thanks again to everyone helping to educate me in the world of saving!

hyposmurf

Baldur wrote: »

the capital & interest within a Cash ISA remains tax free until it is closed or withdrawn.

Is that correct?You actually pay tax when you withdraw from an ISA?If that is the case do they deduct it from the cash you withdraw or deduct it as a % of this withdrawal from your remaning ISA?

Baldur

AliBongo81 wrote: »

do you have any suggestions which might be the best one around at the moment?

Suggest that you check out Kazza's post HERE but note that it has not been updated for a month, also check out Moneyfacts

Baldur

hyposmurf wrote: »

Is that correct?You actually pay tax when you withdraw from an ISA?If that is the case do they deduct it from the cash you withdraw or deduct it as a % of this withdrawal from your remaning ISA?

No - any subsequent interest earned on the withdrawn funds (including any accumulated interest) becomes taxable when the funds are no longer sheltered by the ISA wrapper.

debbie42

AliBongo81 wrote: »

As I am now looking to find one with a good interest rate but allowing me to withdraw at any time - do you have any suggestions which might be the best one around at the moment?

I've just opened a Kaupthing one which pays 6.5%. Very easy to open, but I haven't done much else with it yet.