I still have £135k on the mortgage and im completing on a re-mortgage in 2 days on a 5 year fix @ 3.95%
If you've exhausted your tax-free savings options (PremiumBonds and ISA) then overpaying is the better choice when your rate is 3.95%
I still have £135k on the mortgage and im completing on a re-mortgage in 2 days on a 5 year fix @ 3.95%
If you've exhausted your tax-free savings options (PremiumBonds and ISA) then overpaying is the better choice when your rate is 3.95%
I guess you're out of luck then.
The premium bonds will soon be exhausted, however i dont have an ISA
instead of an ISA i was looking to setup a fixed term bonds savings ?
T212
Isn't the rate pitiful? I mean I assume it is?T212 is paying interest on cash balances though, you can also loan out shares.
Just buy short dated gilts in the ISA, yields to maturity are above 5%.
Interactive investor.
You just need to be aware that fixed bonds savings will attract tax if you've exceeded your allowance for the year (£1000 for basic rate earners, £500 for higher rate earners).
In my case, it's better to save in an ISA @ 4% which is tax free than fixed term bonds @ 5% which incurs tax (for me).
So if i am nearing 50k in premium bonds soon then i will get taxed if i start saving in to a fixed term bonds ?
I am not clued up on tax on savings, i will have to read up on it,
was hoping to use a fix term bonds as you generally make more off interest if you lock it away for half a year or a year than you do in an ISA.
Just landed in mine as well.Just got the £100 from Nutmeg! woot!
Will withdraw it all when i get home. Need that £1000 for a new computer lol
No part of premium bonds incur taxes, so you can forget about them (they are considered gifts or prizes, not interest)
You pay tax on interest earnt from savings in line with your income tax bands.
Interest earnt inside an ISA/LISA is not subject to tax at all.
- For a basic rate tax payer, the first £1000 of interest / year is untaxed. For interest > £1000, you pay 20% tax
- For a high rate tax payer, only the first £500 of interest / year is untaxed. For interest > £500, you pay 40% tax
- For additional rate tax payers, you do not get any tax-free interest, For interest > £0 you pay 45% tax
To give you an example, if your savings were worth £10000 and you are a high rate tax payer, at 5% interest rates you'd earn £500 interest and there would be no tax to pay.
If your savings were £20000 and you were a higher rate tax payer at 5% interest rate you'd earn £1000 in interest that year. The first £500 would be tax free, the second £500 would be taxed at 40%, so your actual "take home" would be £700 from that £1000 of interest, which is actually only a return rate of 3.5%.
So an ISA paying 3.8% interest would earn you more interest than a standard savers account at 5% when considering tax implications for a high rate earner (salary over £50k / year).
Just buy short dated gilts in the ISA, yields to maturity are above 5%.
Just closed mine/submitted the withdrawal request. Can't assess them on returns given the market, but they're really expensive compared to other providers.Just got the £100 from Nutmeg! woot!
Will withdraw it all when i get home. Need that £1000 for a new computer lol
Thanks for the explanation makes sense.
But the maximising position in his example is put £10k in savings at 5% and pay no tax
Put £10k in ISA at 3.8%
Earn £500 = £380 = £880.
Ie you max the highest rate until tax is payable. Then you need to reduce the effective rate on any further investment in taxable accounts by your marginal tax rate (ie 20 or 40%) and recompare.
There is another impossible to predict long term issue. If you had paid into ISAs for years you would be earning all that tax free. If you had chased slightly higher rates in normal accounts you now may have no ability to avoid tax.
It all depends on how much your saving and for how long. (Its a guessing game unfortunately)
I don’t see how to do it. The email said I could transfer it to the existing pot or withdraw it. There’s no option to withdraw.Just closed mine/submitted the withdrawal request. Can't assess them on returns given the market, but they're really expensive compared to other providers.
Not in the app I don't think. Try their website.I don’t see how to do it. The email said I could transfer it to the existing pot or withdraw it. There’s no option to withdraw.