Deposit (savings) Accounts

Where from? Building societies, banks, finance houses, National Savings Bank (through post offices).

How they work Subject to any minimum or maximum investments, you pay in whatever you want, whenever you want. The amount of your capital doesn't vary, but earns interest (which is usually added to your account but can be paid out on a regular basis with some accounts). Interest is usually variable and changes with the general level of interest rates in the economy. Some accounts offer higher interest if you have more than a certain amount in your account. You can withdraw your money instantly with some accounts (though you may lose some interest, and there might be a limit on the amount of cash you can withdraw in any one day; with others, you'll have to give notice - 30 days or 90 days, say.

Minimum investment Varies. For example, £4 for many accounts, £10 for National Savings Investment and Ordinary accounts, £450 upwards for 'higher interest' accounts.

Maximum investment Usually none.

Tax National Savings accounts pay interest before tax has been deducted; interest is taxable except the first £140 from an Ordinary account (husband and wife each get £140 tax-free). Building societies, banks and finance houses pay interest after the equivalent of basic rate tax has been deducted - non-taxpayers can't reclaim it, basic rate taxpayers have no more tax to pay, higher rate taxpayers have more tax to pay.

Good for Emergency fund. Odd bits of spare cash. National Savings accounts good for non-taxpayers, including children.

Bad for Committed regular savings or a lump sum you can tie up for a while - you can probably get a better return elsewhere.


Click here for more information on Shares And Investment Trusts

Investments And Basic Rate Taxpayers

Paying tax on investments is often very simple since, with many, tax at the basic rate has already been deducted when you receive or are credited with income (though you still have to declare it on your tax return). Consider investments which offer a tax-free return if this would be higher than the taxed return from other investments. And, if you're not fully using your capital gains tax allowance, consider investments where the return is in the form of capital gain rather than income.

This is the company's own tax that's been paid; you can't reclaim it. But the tax has come out of the pool... see: Investments And Basic Rate Taxpayers


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