Where to deposit my inheritance?

[AchillesLastStand]

My father died last year and probate has just been granted. I’m expecting to receive around £40k inheritance in the coming weeks and need somewhere to deposit it. The plan is to put the bulk of it off the mortgage when it renews in September 2026 but would like to earn some interest on the money in the meantime. I’ve never been wealthy and would like to make the most of my dad’s money so it can help me out as he intended. I’ve had a look at ISAs and there are a lot available with an interest rate around 4.5% or a bit less. I know I can only pay £20k into a ISA per year. Virgin Money have a savings account with a 5.11% interest rate but this is variable. Any other ideas would be appreciated. I’m not keen to put it into anything with risks attached. Thanks

You'll pay tax on any interest anywhere but an isa so I'd put 20k in to an isa now to take advantage of this years allowance and then again in April with the remaining 20k.

@Houseplanter i didn’t realise that thanks. So you’re saying I could pay in £20k into a ISA this month and then pay a further £20k in April this year because it’s a new tax year?

Yes that's exactly right. You can pay in 20k per tax year

Yep I’d agree, get it in the best interest cash isa you can find - if you don’t need until September 2026 then you could probably get an enhanced interest rate. Just by doing nothing it will probably be about 44k by the time you need it if you can get a good interest rate 🙂

Remember also youre paying interesting on your mortgage. It could be you'd be better off paying it off that sooner, depending on your interest rates

I'd put some into premium bonds. You might not get anything at all, but you never know... (though agree for interest payments go for ISAs)

Oh and most mortgage deals allow you to pay 10% of the balance without penalty.

Agree with others
check if you can pay off mortgage and rate vs isa rates remembering compounding of mortgage interest

Isa now and in mid april
Cov bs have a 5.05% variable with 4 accesses.

Or depending on age pension to get the tax relief

Or lifetime isa. Have to be under 40. Again get tax relief so up to 4k per year would become 5k. Take out at 60.
Lifetime isa counts as savings in relation to UC. and cant withdraw early without high penalty

No, she couldn't. You're only allowed to put in £20K per year.

My mortgage interest rate is around 1.5%. I think our mortgage lender, NatWest, allows you to overpay 20% but I keep reading it’s better to put your money into savings at the moment and then pay off a lump sum when your mortgage deal expires.

If your mortgage is at 1.5% and you can get savings rate if 4.5% then I’d put it in savings and pay off a chunk when your deal runs out, just like you’re already thinking. It’s not really worth the Early Repayment Charge at the current interest rates - if your mortgage and savings were at similar rates, or mortgage was higher than savings it would be. Previous posters are right about ISAs, the limit is per Financial Year, so you could put in this year’s allowance now and then next year’s in April.

You can get up to 7% on some savings accounts but then you have to be wary of maybe needing to pay tax on the interest.

Hope you’re also planning to treat yourself to something nice to remember your dad by!

But theres 2 tax years so 40k total.
If now before last day 5th april
Then 20k on say the 6th april

Rpoviding you havent already opened and funded a tax year 2023/24 20k

Save it as the current interest rates on savings are higher than your mortgage rate.
We have a fixed term bond. We didn't need the money for a year and will prob snowball the original investment plus the interest it's made when it matures in May, so we will then earn interest on the interest.
Look at isa vs fixed term bonds rates - fixed term if you don't need the money for a while. Both are risk free, unless you chose a stocks and shares isa.
I imagine (or hope) the interest rate will start dropping mid year or soon after and so the banks will be very quick to drop savings rates, making a fixed rate a better option. You can earn £1000 in interest before you pay any tax if you're basic rate, £500 if you're a higher rate tax payer.
I'm a paraplanner.

@westisbest1982 per TAX year so at this time of year you could pay in 20k in March and 20k after April 6th and get 40k in.

You are allowed £1000 tax free interest in each tax year too.

You would maybe get 2k interest per year from the 40k.
Splitting into 2 non isas wouldnt work as you would the year after get 2k in a year

£500 for higher tax payers