How to find the Best Rates for your Savings

These days, with interest rates low, it can be difficult knowing where to put your savings so that you can get a decent rate. It used to be the case that your own bank would probably offer a reasonable instant access account and possibly an ISA and maybe even a fixed rate account so that you can choose where to put your money within your own bank and get a reasonable rate. However, these days choice is limited and you may have to look further than your own bank if you want to find a decent rate for your savings. Knowing what types of accounts are available should help you to make the right choice.

Types of Accounts

It is wise to think about what types of accounts there are because different types are likely to offer different rates. For example you will find that if you are prepared to tie your money up or give notice before you withdraw it, you will get a different rate. There are also some tax free accounts that may be useful to you.

– Fixed term Accounts – these accounts will require you to tie your money up for a fixed period of time. This could be for a year or several years, usually up to five years depending on the specific account. With this sort of account you are agreeing to keep your money in the account for that time period without making any withdrawals. Therefore you will need to use it for money that you do not need to spend in the near future. Often you will need to pay in a fixed amount and just leave it in the account. Some will allow you to take a withdrawal during the fixed term and others will not. You will be able to get your money back but depending on the terms, it is likely you will not be paid interest unless it is kept in there for the agreed period of time. These types of accounts tend to pay out more money than instant access accounts as the provider has the security of knowing that your money will be invested for a certain time period.

– Notice Accounts – with a notice account you will need to let the provider know when you want to make a withdrawal and then wait for a certain time period before you get your money. The amount of time that you will have to wait to get your money will vary depending on who you decide to use. It can often be a minimum of three months or could be even longer. Usually the longer you are prepared to tie your money up for; the better the rate you will get. Some will also restrict you on how many withdrawals you are allowed to take per year and possibly how much you can withdraw and pay in.

– Tax Free Accounts – It is important to know that interest on savings accounts is now tax free for some savers up to a certain amount. If you pay no tax, then nothing changes, you would never have paid tax anyway on interest on savings. If you are a basic taxpayer then you are able to earn up to £1000 without paying any tax on that money. If you are a higher rate taxpayer then you can earn up to £500 in interest before you have to pay tax on that money. However if you are a top rate tax payer, then you will still have to pay tax. This means that having a tax free account may not be of any advantage to you, depending on your personal situation. If you are a top rate tax payer or a higher rate and already receive over £500 in tax, then you could benefit from a tax free account, if you can find one at a good rate. A Cash ISA or Premium Bonds would be examples of the types of account that do not attract tax. If you are married or have a partner on a lower tax rate than you then it could be better to put savings in their name and use their tax limit rather than use a tax free account. It will all depend on the rates that you can find.

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