Best savings account?

Aren't saving rate increases a little pointless by design? At 4%, it only takes £12.5k to earn £500 interest before tax is applied. Sure, tax wrappers like ISAs exist but they're limited by the contribution amount per year. I've already had to reduce my instant access with Chase to £6k as I had large savings in there as rates started to increase, I've exhausted my ISA allowance for the year too.

I don't understand why the government don't help savers in these times by changing either/and the PSA or ISA allowance. Sure they'll lose tax income but it could be a good way to support people in these times, it still encourages saving and therefore doesn't stoke short term inflation.
 
Mekrel said:
Aren't saving rate increases a little pointless by design? At 4%, it only takes £12.5k to earn £500 interest before tax is applied.
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If you earn no other income then you can have a lot more earning for you before you pay tax. Think rich people with stay-at-home-spouses. Put six figures of liquid cash you have lying about into your spouse's savings account instead of your own and you quite like these interest rises.
 
Mine should jump up to 5.25% off of today's announcement. Currently with Hanley Economic BS. Moved to them from Zopa when they opened a new limited time savings account and Zopa showed that they could no longer care about keeping up with the market leaders.
 
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200sols said:
Just pay some tax? If that abhors you, premium bonds or gilts.
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'Some', as already mentioned, the money was taxed in the first place. I just find it interesting how these rate rises really aren't that beneficial to people because of the PSA and ISA limitations. You lose at the one end on your mortgage, but barely benefit at the other. I get not encouraging people to spend during these times but I'm struggling to understand why saving isn't encouraged. Why wouldn't saving be encouraged when the whole purpose of trying to bring inflation under control is to reduce demand/spending?
 
BigT said:
If you earn no other income then you can have a lot more earning for you before you pay tax. Think rich people with stay-at-home-spouses. Put six figures of liquid cash you have lying about into your spouse's savings account instead of your own and you quite like these interest rises.
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Understood, but that's not representative of the general population who have capital on their mortgage that vastly exceeds their savings.
 
Mekrel said:
Aren't saving rate increases a little pointless by design? At 4%, it only takes £12.5k to earn £500 interest before tax is applied. Sure, tax wrappers like ISAs exist but they're limited by the contribution amount per year. I've already had to reduce my instant access with Chase to £6k as I had large savings in there as rates started to increase, I've exhausted my ISA allowance for the year too.

I don't understand why the government don't help savers in these times by changing either/and the PSA or ISA allowance. Sure they'll lose tax income but it could be a good way to support people in these times, it still encourages saving and therefore doesn't stoke short term inflation.
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The vast majority will be on £1000 interest tax free as basic rate tax though. So that's 25k @ 4%

The £500 will be for higher rate tax payers.

Although I agree, the limits should still be higher to encourage saving.
 
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Mekrel said:
Understood, but that's not representative of the general population who have capital on their mortgage that vastly exceeds their savings.
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More homes are owned outright than mortgaged in the UK. Those folks, while probably paying tax on interest beyond £1,000 admittedly, still gain more income with interest rate rises and probably welcome this. I hasten to add that’s not me but every boomer and early retired person I know is quite pleased at current interest rates. Of course they don’t see the link to inflation so somewhat paradoxically bemoan the CoL crisis at the same time!
 
ci_newman said:
When you take tax into consideration, it's not that big of a difference overall.

2.46% vs. 2.7% effective rate
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I'd take 2.7% over 2.46%, but the Chase rate isn't effective until August 14th and Chip are likely to also increase their rates soon. If you're paying 40% tax on savings then you should be looking at more efficient options anyway.
 
Eddie99 said:
I'd take 2.7% over 2.46%, but the Chase rate isn't effective until August 14th and Chip are likely to also increase their rates soon. If you're paying 40% tax on savings then you should be looking at more efficient options anyway.
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ISAs are already maxed out and not all that sold on premium bonds. Not really sure what other tax efficient options are left on easy-access / emergency fund type savings
 
Just off the top of my head, what about short term money market funds that are accumulation only. You will still be taxed but it should be capital gains (if I'm understanding it correctly), so depending on the amount you put in, might be within your CGT allowance.

Not as quick to get money out as an instant saver, but only a few days or so.
 
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