Savings account which pays the interest annually

[mouseyowl]

I'm in the lucky position to be earning around £50k this tax year.
I'm also 'lucky' to have received a £150,000 inheritance last year.
I'm not able to put this in my mortgage because the early penalties are very high, but I'm only paying 1.5% interest as I fortunately remortgaged right at the right time rates wise.

I'm a solo parent (no partner and no parents to help out) and my DC is in nursery for 2 more years so my childcare is expensive. I get the tax free childcare which helps.

I am hoping to move house next year to be closer to work, so I don't want to lock my savings into bonds at all because I want to be as agile as possible in terms of offering on a house when one comes up that I like.

But I don't want lose my child benefit by going over the £50k threshold (eg salary plus interest on the £150k). I don't really want to put any money into my pension, my employer doesn't match very much and I'm stretched day-to-day money wise after all the bills are paid as it is.

I was trying to find decent interest rate, easy access savings account which pay the interest rate annually but don't lock you in or penalised you if you close the account before the year is up.

Does anyone know of any?
Sorry for the essay, but I didn't want to be questioned about the details, so just laying it out there

Ps I've never been in the £50k salary bracket before and I'm possibly not going to be next year or ever again, so I need to be careful. No child support from DC father, he is deceased.

The Tesco instant access one is annual (which I only know because I was wondering why my interest wasn't going in monthly and had to check why). I think it's 31 March

I thought the child benefit limit went up from 50k in the last budget?

You could put £20k in a cash isa as that interest will be tax free. I have a Moneybox one and I am sure that allows withdrawals.

Child benefit went up - so now you have up to 60k before you have to start paying some back, which might help.

Here you go:

www.moneysavingexpert.com/savings/savings-accounts-best-interest/#easyaccess

You don't start to lose child benefit until you earn £60k after pension contributions so you're way off that. However depending on your pension contributions, you might tip over into 40% tax and that might 'cliff edge' your annual savings allowance down to £500 of untax interest, which is difficult to predict without running all the numbers.

You probably do want to try and mitigate the amount of interest that is taxed though.

So put £20k in a cash ISA now and another £20k. It might also be worth putting £50k into premium bonds as the payouts aren't taxable and it should match interest on average (is a bit of a risk though).

The rest you'll just have to take the hit on taxable interest - look on Moneysupermarket to see if there's a suitable account where you can delay the interest until next year, I don't know if this exists or not, but even so, you're still in healthy profit over your mortgage rate.

NS & I do a 'Direct Saver' - its not the greatest interest ever at 4% but not the worst - BUT, it also guarantees ALL your money - which most only are covered up to £85k if anything happened/ went bust etc

Easy access and pays annually

You could also put £50k into premium bonds - would the prizes then be counted towards your income? They are not counted towards Personal Savings Allowance for tax. But like I say double check.

Most savings accounts will give you the option of monthly or annual interest, based on an earlier MSE recommendation I have accounts with Charter that gave me this option.

With £150k, think about two accounts with two separate and unrelated banks to keep within the FSCS £85k cap.

I have my money in Kent Reliance instant access paying 5.11%. You would be well advised to split the money between two institutions as you are only guaranteed £85000 if the worst should happen

Search on here, you can specify whether you want easy access or notice accounts, and when you want the interest to be paid:

https://moneyfactscompare.co.uk/savings-accounts/

Thanks everyone.
I will look into premium bonds - I thought the 'prizes' were taxed and they had to go on your tax return?

Didn't know the £50k had been raised to £60k so that's great news, also didn't know it wasn't until £80k you lost the whole CB (just not been on my radar as a basic taxpayer my own life).

I've done my ISA application, thanks for that tip!

Thanks for all the posts re savings accounts that pay annually, I realise I can google, but it can take hours trawling through and time is precious, so direct tips on the accounts which do is gratefully appreciated

Premium bonds prize money is exempt from tax.

I cannot understand the attraction of premium bonds when interest rates are high. You would have to win £170 ever month to get the equivalent interest

Winning £170 pm is in line with expectations for someone holding £50k. Taking the tax benefit into account and with statistically average luck, you're unlikely to be worse off than an instant access account.

The problem with annual interest is that all of the interest earned will be assigned to one tax year, rather than spread over 2 years if it is paid monthly.

@WuTangGran - because financial years run April to April, hence opening a 12 month fixed rate account now which pays interest monthly, rather than annually, would spread the taxable interest over two tax years.

I dont think it's the poster that you are quoting thats the dense twat.

Tax years hun.

Clearly you are a thick cunt, so I will make this as clear as possible. You commit to an account were the money is locked away for a year, then unless the year that you have committed to saving in exactly coincides with the tax year it will necessarily be spread over two tax years and therefore reduce the liability in any one tax year.
I have neither the time or the crayons to explain it better to a fucking moron.

I have neither the time or the crayons

😆

It's times like these that make it a shame that, when the grown ups log on, @Brahumbug and @WuTangGran''s fascinating take on the OPs query will be deemed to be 'breaking talk guidelines.

I think @Brahumbug response is entirely proportionate to the awful post by @WuTangGran
perhaps try think, engage brain then and only press post next time
an apology is in order
apologies for derail OP

Having slept on it and just woken up, I do think my response was somewhat intemperate even if fully justified by the abusive and entirely incorrect post. It is ultracrepidarian posts like that one, that make getting advice from this excellent website so fraught.