Completing soon but not buying immediately

[ROYGBIVain]

Hi All, am close to completing on selling my house. The purchase of my next house fell through, so I will need to rent for a bit while I look for another to buy.
I guess I’ll have a fair bit of money in my bank account soon from the sale, which scares me a bit safety wise. Would it be prudent to open a new bank account for the sale income so I can leave that bank card at home and not take it out with me every day? Any type of account recommended? Does anything pay interest these days? Otherwise any thoughts on what will happen to house prices in the next 6 months?

Definitely don't leave it all in a current account. Banks only are guaranteed up to £85k per person per bank group. You could put it in NSandI which are government bonds so 100% guaranteed. Or put the first 20k each into an instant access cash ISA, but then you will use up your investment for the year. Or premium bonds. You probably should also seek independent legal advice.

Do make sure if the house was sold with a partner that you equally split the money to save rather than it just going into one person's account.

How much will you have to put in savings? I have a trading 212 cash isa paying 4.1%. Its a flexible isa so you can withdraw and pay back in later if needed. (Assuming you are not using any of your isa allowance for stocks and shares). Chase bank i currently have a savings account boosted to 4.55%. You will need to pay tax on any interest you earn over either £500 or £1000 though depending on if you're a higher rate tax payer or not. Or you can put upto 50k in premium bonds which also isnt taxed but the rate isnt guaranteed (its given out as prizes)

As PP has said, if it’s more than £85k you need more than one account. I did this once in the same situation and just put the money in current accounts with the best interest rates I could find - as I didn’t know when I’d need to access it for my next purchase. In the end it was only a few months

Put as much as possible into easy access ISAs then the rest split between savings accounts with a maximum of £85k per account. Depending on the rest of your income you can only have £500 or £1000 interest tax free in the tax year so keep any interest statements so you know where you are.

Actually, the bank guarantee scheme anticipated this issue and, for what are called ‘qualifying life events’ (which the sale of a house that was your principle private residence is) the limit is £1m for 6 months :)

https://www.fscs.org.uk/making-a-claim/claims-process/temporary-high-balances/#:~:text=FSCS%20protection%20for%20temporary%20high%20balances&text=You%20may%20be%20entitled%20to%20additional%20protection%20if%20your%20account,were%20paid%20when%20you%20retired.

For longer than 6 months then yes, you could could/ should split it but look out for brands that are part of another bank as the £85k applies per bank.

Thank you all, I didn’t know about the max split between accounts. It’ll be just over £250k so yes that applies

Can I ask the solicitor that it’s paid into these varied accounts directly? Or will they just pay into one account (think I gave them details for my current account) and I divide it up from there?

Our solicitor just transferred it to one account. You need to consider too that if you don't put it into an account which gives interest then you will lose in relation to inflation so your money will by you less of your future house, assuming house prices increase along with inflation. You may need to pay tax though on the interest from some accounts.

Thanks for this. I don’t know anything about paying tax on interest from bank accounts - does that mean I’d have to do a tax return but no one will prompt me to do it?

Are you employed or receiving a pension? If you are employed or receiving a pension HMRC will change your tax code to recover the tax due on interest earned (the banks tell HMRC how much interest you have earned). If you would rather pay the tax due in one go rather than your tax code or don't have any income taxed through PAYE then you can complete a self assessment.

I work full time yes. So they’ll sort the tax issue out automatically - that’s a relief!

Are there any advantages of putting some money in an isa and premium bonds as well as bank accounts?

Yes max out your ISA allowances as that interest is tax free. Premium Bond winnings are tax free but not guaranteed and also I remember it being pretty slow getting your money out again but that might have changed as it's been a while since I did it.

Check the notice period you need to give on any withdrawals from bank accounts you choose and also any penalties or reduced interest if the money isn't in there for a certain length of time

The solicitor will need to pay your money into account which has been open for a certain period of time.

Our solicitors want to have proof the account has been open 12 months.

They won't be able to pay it into newly opened accounts due to money laundering regulations.