To ask how you would split £27k? …

[bankingpanda]

… into two savings account?

1. ISA - max. I can put in there is £20k. It’s tax free. Interest rate 2.85% AER
2. Savings account. I believe no limit on what to put in there. I get taxed on this. Interest rate 4% AER

currently I have no money in either of these accounts (apart from the £1 I needed to put in there to open them)

I’m struggling to know what to do. Really want to put the money into savings account as so far it was just sitting in my bank account 🫣

I’ve instant access to both accounts if I need to, but I also I’m thinking of leaving about £3k in my standard bank account so I don’t need to touch savings at all.

thoughts?

If you’re saving to buy a house Put 4000 in a Lisa, they government will top it up to 5000, do the same again in April. Keep doing this every year until most is in a Lisa, maybe keep 5000 in your savings account for emergencies. If you put 4000 into a Lisa you can only put 16000 into a normal isa that tax year.

Can I ask a question? If I put £20K in an ISA now, can I put another £20K in when the new tax year starts in April?

Yes, its 20k max each financial year (6th April-5th April)

@owlsdance

As I said no one can predict rates in 12 months - so glad you can 🙄

You can definitely get a higher rate on your ISA OP, not sure about your standard savings if its instant access but it is worth shopping around. Money saving expert is good for browsing different accounts available. The benefit of the ISA is not paying tax on your interest. However, unless you are a higher rate tax payer, you can earn £1000 in interest each tax year without paying any interest anyway. Therefore if you can get a higher rate of interest on a non-ISA account, and you will be accruing less than £1000 interest, you may be better off keeping them in savings this year.

However please factor in that you can add to your ISA every year without being liable for interest, so it can be worth accumulating if you think you'll continue to save at a decent rate. E.g. if you end up with £60,000 savings total in 3 years time, and you've maxed out your ISA allowance and paid £20k in each year, you won't be liable to pay tax on any of the interest. If you had £60,000k in a 4% savings account, you would earn £2400 interest and would need to pay tax on £1400 of that.

Also if your savings accounts are instant access, no need to keep 3k in your current account. You can easily move it over if you need it, but it will be accruing interest for you whilst it stays in the savings on a daily basis (e.g. 4k in a 4% savings account will earn you just over £13 per month). Its also a bit safer in case your current account was compromised

And there are people who have been saving small amounts every month for many years who eventually have to decide what to do with the accumulated amount.

It doesn't make OP or anyone else bad people. And there is absolutely no reason why the question cannot be asked.

@bankingpanda ISA's currently are only beneficial to those who earn more than £1000 a year in interest as we all are allowed to receive that without paying tax on it. You will almost certainly find you can get a higher rate of interest by looking elsewhere.

It's absolutely fine to divide it up into two or more savings accounts, depending what you intend to do with the savings. If, however, you are saving for something, you will find that the accounts paying the highest interest have restrictions on them in one form or another. Some you invest for a fixed period and can't touch your money for that fixed period. Some will allow you to make 2 or 3 withdrawals during the year without the quoted interest payment going down drastically if you make any more. Some need 3 or 6 months notice to withdraw anything out of the account

So you need to think about whether you might need to withdraw some of it at a moments notice or whether you won't need access to it for a longer period and open accounts accordingly. Possibly one easy access account with a limited amount in it for any 'emergencies' and another account which can't be withdrawn immediately. It's what I did with cash my Mother insisted on giving me and my siblings when she sold her house ( a very long story, which I won't go into here). We had no intention of using it to spend on ourselves in case she subsequently needed it, so some was in a an easy access account and most was split between a fixed rate account and a 3 month notice account. Have a look at Moneysupermarket

Once you open the account(s) you need to check at least once a year, whether you are still getting a decent return for your cash and if not, change the account(s)

https://www.moneysupermarket.com/savings/

Hardly tone deaf. I am so sorry you and many others are struggling just now, but it's a perfectly reasonable question for the OP to be asking. She has saved the money

No need to be nasty because someone is fortunate enough to (apparently) be in a better position than you are.

@bankingpanda I should have said in my earlier post that you can earn up to £1000 in interest if you are paying tax at the standard rate - but it's only £500 if you are a higher rate tax payer

Oh shut up!!!

OP doesnt need to apologise for having money, no matter how she got it.

Some people are making ends meet, some people are not having to make ends meet, there are people in the middle of this as well.

The world doesnt revolve around one demographic

Personally I'd put it in a stocks amd shares isa as you will get a far better return if you plan to invest over 5years.
If you max out your ISA allowance prior to the April cut off date you can invest the rest tax free also.
If you go for a cash ISA there are better rates available.

Depends on your tax rate. If you're on standard you get 1000 tax free. 27k at 4% is 1080 so just over. Put it all in the savings as we're near the end of the tax year then reconsider after April 6th.

If higher tax you get 500 tax free. Still leave it in the savings until next tax year though, unless you've already earned a bit of interest already.

You can put 20k per person into an ISA per year

Year 1 20k maximun
Year 2 40k max
Year 3 60k max
Ongoing
Tax free

The Government may increase or decrease the amount over time

On top of the 20K per year ISA amount
You can also pay max £25 per month into a tax free Friendly Society savings account & some provide free life insurance too

🙄🙄 jesus christ

into your savings and then drip feed into a LISA so you get the government top up

Maybe people would say the same about you when you comment about what you buy in M&S. That’s quite extravagant isn’t in when some people can only afford to shop in Aldi🙄

Another option is to go for some regular saving accounts. These have higher interest. For example First Direct offers 7%..
You can only put small amounts per month in but if you can be bothered then open a few up.. (with different banks) and set a standing order from your best 'regular saving account' into these to max out the interest.. 💪😀

Exactly but there had to be one didn't there. 😖

The world is not full of "have-nots", there are also quite a few "haves" and plenty of "have a bit". 🙃

Ref regular savings
An advertised 7%
Actually at the end of the year, it will only pay 3.5% in interest ( not 7%)
It will pay HALF the advertised amount, due to the REGULAR part of the savings

Hope that makes sense ?

Similarly 10% regular savings
At the end of the year, it would pay 5%

Look at the savings calculators on money saving expert website

I said nothing about predicting interest rates, I said the likelihood that they will go down is high. It's not the same thing.

FYI
I received a lump sum when I was made redundant in the past
It is no fun, not having a job !

It is prudent to make the most of the money & not let the tax man get it !
Secondly, you don't know what circumstances this person received their money

Thanks for explaining that. I set up the FD one only yesterday and was planning on transferring the max £300 every month from a different savings account! I will see if I can close it.

£500 if a higher rate tax payer

There's fixed rate isas out there with far better interest, I'm getting 5.5 currently.

And it's not tone deaf to ask for advice on being responsible with money. In fact if more people were responsible there would be a lot less issues with poverty - lack of financial literacy is a main contributing factor to the reason the people I help are in the situation they are in (think too many high interest loans, not understanding compound interest, sharp practices by hp companies etc). Well done op for saving, it's too easy to spend whatever you have on stuff in the good times. (I'm not saying everyone can save, or everyone is irresponsible but 15 years of debt counselling tells a tale)

Shawbrook paying 5% easy access savings, you can take the interest monthly or annually. I opted for monthly to keep some of the interest in this tax year as interest has been low so no tax liability this year. If I took all annually next year I would have had to pay tax on it. My ISA's maxed out for this tax year.