If you have debt don’t save. But if you don’t have debt (or you want to ignore me and save anyway) make sure you get the best return on your money. There are two problems. First, the banks want to pay as little as they can get away with. Second, the new Chancellor is hiding underneath your savings pot with his spanner draining away £1 in every £5 it earns. So to make your money work harder (after all you worked hard enough to get it)
Tax
Tax on savings is voluntary. You can pay it if you want to. But as long as
you save less than £3000 a year you do not have to pay tax. The choice is yours.
Cash ISAs were one of Gordon Brown’s best ideas before his recent promotion.
Because all the interest your money earns is paid tax free. That’s right.
No-one will creep up in the night and nick a fifth of it. And even better if you
are fortunate enough to pay higher rate tax (I call earning £40,000 a year quite
fortunate don’t you?). Because it’s free of that too.
ISAs are so simple and attractive that more than £100 billion has been put in them. And they are good for everyday savings – putting aside a few quid for a holiday or a new outfit or Christmas. Or just saving a bit of cash so you can sleep at night. You can take the money out whenever you like out and it is still tax-free. Though when you put it back that will count towards the £3000 annual limit (it rises to £3600 next April).
Best Rates
Although Gordon made cash ISAs simple the banks have made them complex and
imposed restrictions they hope will confuse you into picking a bad deal. Choose
one that follows these simple rules.
You can pay in and take out however much or little you like
You can pay in and take it out whenever you like
There is no bonus rate for the first few months.
You do not have to open a linked bank account.
Find one like this that pays 6% (Egg for example pays 6.05%). In other words if you put £1000 in there you will make £60, tax-free. And you’ve done no work! Magic!!
30 June 2007