Tuesday 6 March 2012

4%+ Yield Risk-Free and Tax-Free (UK)

New savings bonds have been announced for UK investors, paying over the benchmark 4% interest rate, tax-free - and because of UK government bank guarantees, this is effectively risk-free as well.

The DIY Income Investor approach involves building up your portfolio of savings and investments. This account may be relevant to those investors in the process of building up their portfolio or those who are looking to hold some cash on deposit, tax-free.

These are Cash ISAs, of course - offered by a range of providers, including Yorkshire, Halifax, Clydesdale Bank, Leek United, BM Savings, Santander and several others. The top rate currently offered is 4.5% fixed for five years from Halifax.

In the coming financial year individuals will be able to invest up to £11,280 in a 'stocks and shares' ISA, or they can invest up to £5,640 into 'cash' ISA, or they can split their money between the two (whilst observing the maximum cash amount). You can open one cash ISA, and one 'stocks and shares' ISA each tax year as well as transferring balances from existing Cash ISAs.

Now, most 'income' investors will be targeting an even higher rate of tax-free return but this is an attractive risk-free return that may be suitable for more cautious investors.

And there may be even better cash ISA offers coming onto the market as UK banks compete in the up-coming ISA season. So now is a time to think about whether having part of your portfolio in a cash ISA may be appropriate.

(Updated and revised 8/3/12)

I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.


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