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We have £40k maturing shortly, and are not sure where to put it?

01 April 2021

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Question by Paul

I have to put cash aside for a large tax bill in Jan 2022 (several times the FSCS limit). What's the best approach to grow the sum safely and pay the bill on time?


Answered by Carla Brown

Hi Paul

As we are looking at a relatively short time frame here (less than 12 months) the money should be kept in cash funds rather than invested. The FSCS Set-up by parliament and funded by the financial services industry and is a completely independent and free service, protecting you when financial firms fail. For cash deposits in a UK authorized bank or building society your are covered for the first £85,000 per person for a single account, or £170,000 for a joint account. You need to be careful that you do not hold multiple accounts with banks that are part of the same banking group as they will be treated as one bank. You can check this at the FSCS website https://www.fscs.org.uk/what-we-cover/banks-building-societies/

They also cover temporary high balances (subject to conditions) up to £1m for 6 months and the details are on the FSCS website.

However, you are looking at a timeframe of more than 6 months so I would suggest spreading the money over enough banks/building societies to keep below the FSCS limits. There are now platforms who can do this for you rather than you having to go to individual providers yourself. You open one account and then via that platform you get access to enough banks and building societies to keep within FSCS limits. This saves you the time and hassle of doing it yourself, but of course there will be charges involved.

You may also want to consider National Savings (NS&I) who are backed by HM Treasury and will guarantee 100% of your savings. The final thing to be aware of, is to make sure you don’t tie the money up into a fixed rate bond that you cannot access, given you need the money in January 2022. You could consider a 6 month fixed rate account, or an account with a notice period, but make sure you remember to give notice to the provider in time to pay the tax bill.

Answered by

Carla Brown

Founder and Managing Director

Carla is the founder and Managing Director of Oakmere Wealth Management Ltd which is a growing practice on the outskirts of Chester.