Plan ahead to make your tax cash work hard before you hand it over.
The deadline of 31st January is looming for those who need to file a tax return and pay any tax due. And according to HM Revenue & Customs (HMRC), of the 11.5 million taxpayers that need to do so, just under half haven’t got around to it yet.
For those individuals or businesses who do need to file a tax return and have tax to pay, they will often keep the amount they expect to be due for the tax bill in cash, so that it’s available when needed. But rather than leaving the money in their bank account, it can pay to make the cash work harder over the year. Whilst it’s obviously too late for this tax year, those who have an idea about what they might need to pay next year could earn a meaningful amount more if they shop around and find the best savings accounts.
Best buy one year fixed term bonds have been strong performers over the last year – on average increasing by over 23%, compared to rates available this time last year.
At the beginning of January 2018, the best buy 12 month fixed term account was paying 1.85% - today you can earn 2.10% with Gatehouse Bank – over 11% more. And if you are yet to open an account via the Raisin UK website, the welcome bonus they are currently offering could boost that rate to the equivalent of up to 2.30% - head and shoulders above the rest of the competition.
So, rather than leaving your money languishing in an easy access account which not only offers the temptation to be dipped into, but also pays much less interest - especially if you leave it with your bank - instead you could save a little less and use a bit more of the extra interest earned.
| Easy Access to Easy Access | Current Rate | Interest earned based on amount deposited | How much more interest earned on best easy access rate (1.50%) | |||
| Provider/Account Name | AER % | £10,000 | £50,000 | £50,000 | £85,000 | |
| Lloyds – Easy Saver | 0.20% | £20.00 | £100.00 | £190.00 | £950.00 | |
| HSBC – Flexible Saver | 0.15% | £15.00 | £75.00 | £195.00 | £975.00 | |
| NatWest – Instant Saver * | 0.30% | £30.00 | £150.00 | £180.00 | £900.00 | |
| Barclays – Everyday Saver * | 0.30% | £30.00 | £150.00 | £180.00 | £900.00 | |
| Santander – Everyday Saver | 0.35% | £35.00 | £175.00 | £175.00 | £875.00 | |
| Best 12 Month Fixed Term Bond - Gatehouse Bank (2.10%) | 2.10% | £210.00 | £1,050.00 | |||
| Rates based on £50,000 and £85,000 deposited | ||||||
| * This is a tiered account. Rate shown based on balance of £50k and £85k. | ||||||
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Rates correct at 09/01/2019
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Obviously, you need to make sure that the bond is going to mature in time – otherwise you could be fined. But if you are a little late getting to it, all is not lost. Masthaven offers a nifty little facility which allows you to choose the term of your bond – and it doesn’t have a dramatic negative effect on the rate. For example, at the moment Masthaven’s 12 month bond is paying 1.94% gross/AER. If you reduce that term to 11 months, so that it matures in time for you to pay your tax, the rate is reduced to 1.91% gross/AER – still a healthy Improvement on even the best easy access account currently available.
Masthaven also offers this facility to businesses, as does Aldermore. So, you might be too late to plan for this year, but you’ve plenty of time to plan better for next year.
To find out more about how to make your cash work as hard as possible, contact one of our savings experts on 0800 011 9705.
And if you need to speak to a financial adviser about how to be as tax efficient as possible, while we can’t directly help, we can pass you in the direction of someone who can. Call Claire or Leighton or request a free consultation.
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