Best place to save money that is due for tax?
Options
chr0s
Posts: 8 Forumite
Hi 👋
I am self-employed, and I have a fat lump sum sitting in my bank account that is due to be paid to HMRC next January.
What is the best thing to do with this money in the meantime? I would like to earn as much interest on it as possible, with the following caveats:
I used the bank account savings calculator (I won't link because I'm a new account and I don't want to get flagged for spam, but you can Google it if you're not familiar). It advised me to set up 3 accounts and, through various transfers, achieve 4.5% interest.
Any other suggestions are greatly appreciated!
I am self-employed, and I have a fat lump sum sitting in my bank account that is due to be paid to HMRC next January.
What is the best thing to do with this money in the meantime? I would like to earn as much interest on it as possible, with the following caveats:
- There can be ZERO risk of the money losing value
- I must be able to make multiple deposits between now and next January
- I must be able to withdraw the money in January (i.e. no 12-month minimum arrangements)
I used the bank account savings calculator (I won't link because I'm a new account and I don't want to get flagged for spam, but you can Google it if you're not familiar). It advised me to set up 3 accounts and, through various transfers, achieve 4.5% interest.
Any other suggestions are greatly appreciated!
0
Comments
-
Premium bonds would be one option.
They are a gamble but your original capital is guaranteed and you should be able to take the money out just after the draw on 1 January 2020.
Without putting your capital at risk I think you will struggle to beat 4.5% (assuming the three account trick doesn't put it at risk).0 -
Thanks for answering. I've just taken another look at the three account trick and realise I left an account ticked that I'm not eligible for, so the updated rate is 3.3%.
The accounts are as follows, risk free as far as I know:- TSB Classic Plus
- Nationwide Flexclusive Regular Saver
- Bank of Scotland
Premium bonds is an interesting shout, I hadn't thought of that. I'll take a look.0 -
- TSB Classic Plus - 3% from July
- Nationwide Flexclusive Regular Saver - no longer available but you could get 5% from a FlexDirect if you've not had one before
- Bank of Scotland - 1.5% and needs 2 direct debits
0 -
If your amount exceeds the aggregated balance on those that will earn decent interest, you might add a couple of monthly saver accounts, which can be withdrawn from or closed before their full term.0
-
I didn't really have a use for them until recently, as smaller sums could fit into high rate bank accounts and I have generally put larger amounts of spare money into investments or pensions rather than kept them around as cash.
Premium bonds is an interesting shout, I hadn't thought of that. I'll take a look.
However next Jan I will have a hefty CGT bill to pay and am already using some of the higher paying accounts for my normal savings, so PBs are a decent home for a high rate taxpayer to put their cash - a normal level of wins would pay a rate of not much more than a percent, but that would be better than earning 1.5% of interest and then having to pay 40% tax on it.
If you don't pay high rate tax and/or won't earn enough interest to use up your personal savings allowance, there is no real benefit to PBs over just getting a decent instant access account that pays 1.5% without the gamble of winning more or less than that.
These sort of questions usually hinge on how much money you already have using up all the best savings accounts in your day to day life, and how much extra money you now need to put away to pay your tax bill.
For example, there is no way my 'Fat lump sum' would all be able to earn 4.5% when spread over the three savings accounts you mentioned, because they only pay that sort of interest on a few thousand and I have tens of thousands to stash. So I am looking at accounts that pay interest on a much higher upper limit, which means earning gross interest of only about a percent and a half for instant access, and PBs will compete favourably with that for a high rate taxpayer who has burnt through his personal savings allowance.
However, if your 'fat lump sum' is small enough to fit into accounts paying several percent with little effort, the premium bond option with average win rate is not at all competitive with that, and if you're deluding yourself that you might win a life-changing amount, you might as well just buy an occasional lottery ticket for a similarly unlikely chance of that happening.0 -
- TSB Classic Plus - 3% from July
- Nationwide Flexclusive Regular Saver - no longer available but you could get 5% from a FlexDirect if you've not had one before
- Bank of Scotland - 1.5% and needs 2 direct debits
Looks like the tool I used has out of date information, in that case. Can you recommend a good place for up to date information on available bank accounts?0 -
bowlhead99 wrote: »For example, there is no way my 'Fat lump sum' would all be able to earn 4.5% when spread over the three savings accounts you mentioned, because they only pay that sort of interest on a few thousand and I have tens of thousands to stash. So I am looking at accounts that pay interest on a much higher upper limit, which means earning gross interest of only about a percent and a half for instant access, and PBs will compete favourably with that for a high rate taxpayer who has burnt through his personal savings allowance.
However, if your 'fat lump sum' is small enough to fit into accounts paying several percent with little effort, the premium bond option with average win rate is not at all competitive with that, and if you're deluding yourself that you might win a life-changing amount, you might as well just buy an occasional lottery ticket for a similarly unlikely chance of that happening.
This is really useful, thank you. I think my best option is the accounts in that case, however I need to figure out which ones are best.0 -
https://www.moneysavingexpert.com/banking/compare-best-bank-accounts/#interestLooks like the tool I used has out of date information, in that case. Can you recommend a good place for up to date information on available bank accounts?
https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/0 -
Reading the Top Savings Accounts link at the top of the page would be 10 minutes well spentLooks like the tool I used has out of date information, in that case. Can you recommend a good place for up to date information on available bank accounts?
You say that 'I would like to earn as much interest on it as possible'
If you really mean this you will need to open quite a few accounts including regular savers (like the no longer available Flexclusive Regular Saver). Perhaps have a look at the MSE Regular Savings Accounts review. Although they typically have the best rates you can't put lump sums in them and will have to work within the monthly deposit restrictions
In practise you may not want to earn the maximum possible interest and settle for a balance that you can live with
PS knowing the sums involved would help whittle down the option open to you0 -
This discussion has been closed.
Categories
- All Categories
- 343.2K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.3K Work, Benefits & Business
- 608.1K Mortgages, Homes & Bills
- 173.1K Life & Family
- 247.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards