Saving Money

Posts about saving money from a 60-plus perspective, including cashback schemes, deals sites, discount offers, and so on.

How to maximize your tax-free savings interest

How to Maximize Your Tax-Free Savings Interest

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In these challenging times, we all need to ensure our savings stretch as far as possible. So today I thought I’d set out the range of tax-free allowances you can use to help do this.

Personal Savings Allowance (PSA)

The Personal Savings Allowance (PSA) was introduced in April 2016 and allows you to earn a certain amount of interest tax-free each year. The amount of your PSA depends on your income tax band:

  • Basic Rate Taxpayers (20%): You can earn up to £1,000 in savings interest tax-free.
  • Higher Rate Taxpayers (40%): You can earn up to £500 in savings interest tax-free.
  • Additional Rate Taxpayers (45%): You do not receive a PSA, meaning all interest earned is taxable.

For example, if you are a basic rate taxpayer and earn £900 in interest from your savings in a tax year, this amount is within your PSA and therefore tax-free. However, if you earn £1,200 in interest, £200 of that will be subject to tax at your marginal rate.

Individual Savings Accounts (ISAs)

ISAs are another powerful tool for earning tax-free interest. There are several types of ISA, with varying annual contribution limits and benefits:

  • Cash ISAs: You can save up to £20,000 per year, and the interest earned is entirely tax-free.
  • Stocks and Shares ISAs: Also with a £20,000 annual limit, any capital gains or dividends received are tax-free.
  • Lifetime ISAs (LISAs): Designed for first-time homebuyers or retirement savings, you can contribute up to £4,000 annually to a LISA, with a 25% government bonus on contributions. The interest earned is tax-free.
  • Innovative Finance ISAs (IFISAs): These allow you to earn tax-free interest from peer-to-peer lending within the £20,000 annual limit.

You can mix and match these ISAs and you can now open as many as you like within a single tax year. But the total amount you contribute in a tax year cannot exceed the overall limit of £20,000.

Starting Rate for Savings

For those with a lower overall income, the starting rate for savings can be particularly beneficial. If your total income (excluding savings interest) is less than £17,570, you may qualify for the starting rate for savings, which can provide up to an additional £5,000 in tax-free interest.

Here’s how it works:

  • If your non-savings income is below £12,570 (the personal allowance for most people), you can use the full £5,000 starting rate for savings.
  • For every £1 your non-savings income exceeds £12,570, your starting rate for savings decreases by £1.

For example, if your non-savings income is £15,000, your PSA is reduced by £15,000 minus £12,570 = £2,430. Subtracting £2,430 from £5,000 leaves £2,570. You can therefore earn up to £2,570 in interest tax-free under the starting rate.

If you qualify for both the starting rate for savings and the PSA, you can earn up to £5,000 in interest tax-free under the starting rate, plus an additional £1,000 (or £500 for higher rate taxpayers) under the PSA. For example, if you’re a basic rate taxpayer with £12,000 in non-savings income, you could potentially earn up to £6,000 in interest tax-free (£5,000 from the starting rate and £1,000 from the PSA). Both allowances can be combined to maximize the amount of interest you can earn tax-free.

Premium Bonds and Other NS&I Products

Premium Bonds and certain other National Savings and Investments (NS&I) products offer tax-free interest or prizes.

Premium Bonds provide a chance to win tax-free prizes each month. While the odds of a big win may be slim, any winnings are tax-free. Similarly, some NS&I savings products, like certain Savings Certificates, offer tax-free interest.

Summing Up

By understanding and utilizing these tax-free allowances, you can maximize the interest you earn on your savings without paying tax. Here’s a quick recap:

  • Personal Savings Allowance: Up to £1,000 for basic rate taxpayers, £500 for higher rate taxpayers.
  • ISAs: Up to £20,000 per year across various types.
  • Starting Rate for Savings: Up to £5,000 if your non-savings income is below £17,570.
  • Premium Bonds and Some Other NS&I Products: Tax-free interest and prizes.

Be sure to review your financial situation regularly and consider using these allowances to optimize your savings strategy. By leveraging these benefits, you can grow your savings more effectively and keep more of your hard-won interest.

Finally, this post sums up the situation currently. The new government is looking to raise extra tax revenue any way it can, however, and tax-free savings allowances certainly aren’t immune. Obviously I will update this article (and/or publish a new one) if the rules are changed in future.

As always, if you have any comments or questions about this post, please do leave them below.

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Ten tax-free ways to boost your finances

Ten Tax-Free Ways to Boost Your Finances

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As you may have heard, UK citizens are currently bearing the highest tax burden since WW2.

And with the new government looking to raise more money to pay for its ambitious spending plans, there is no sign of that changing any time soon. So today I thought I’d set out some ways you may be able to boost your finances without increasing your tax liability.

As you’ll see, doing this needn’t involve complicated investment strategies or seeking ‘loopholes’ in tax legislation. There are numerous perfectly legal ways to boost your finances without worrying about the taxman. Here are ten methods to consider…

1. Maximize Your ISA Contributions

Individual Savings Accounts (ISAs) offer a fantastic way to save money tax-free. The annual ISA allowance for 2024/25 is (still) £20,000. Whether you choose a Cash ISA, a Stocks and Shares ISA, an Innovative Finance ISA (IFISA), or a combination of all three, any returns you make are entirely tax-free. This makes ISAs a straightforward and effective way to boost your savings.

2. Utilize Your Personal Savings Allowance

For basic-rate taxpayers, the first £1,000 of interest on savings is tax-free each year. Higher-rate taxpayers can earn up to £500 in interest before paying tax. This means you can keep more of the interest you earn from your savings accounts, helping your money grow more quickly.

3. Invest in Premium Bonds

Premium Bonds, offered by National Savings & Investments (NS&I), provide a unique way to save money tax-free. Instead of earning interest, your bonds enter a monthly prize draw for cash prizes. Any winnings are tax-free.

Premium bonds are guaranteed by the UK government and you can get your money back at any time. Obviously there are never any guarantees how much you will win (or if you will win at all) so it’s strongly advised that you have other savings and investments as well.

4. Try Matched Betting

Matched betting is a method used to exploit free bet promotions offered by bookmakers. When done correctly it’s risk-free and the earnings are tax-free in the UK. Matched betting involves placing bets on all possible outcomes of an event using free bets to ensure a profit regardless of the result. While it requires careful attention to detail, it can be an effective way to boost your finances. Just be aware that the longer you do it, the more difficult it may become to find suitable opportunities. But if you need a short-term, tax-free income boost, matched betting can certainly fit the bill.

I have written about matched betting on PAS on various occasions in the past. You can read my latest article ‘Can You Still Make Money From Matched Betting?’ here.

5. Claim Marriage Allowance

If you’re married or in a civil partnership and one of you earns less than the personal allowance (£12,570 in 2024/25), you could transfer £1,260 of your allowance to your partner, reducing their tax bill by up to £252 a year. This one simple step can provide a meaningful boost to your household finances.

6. Earn Up To £1,000 Tax-free 

If you have a hobby or skill, consider monetizing it. The UK government allows you to earn up to £1,000 (gross) tax-free each year from trading or property income under the Trading and Property Allowance. This could include doing odd jobs, selling handmade crafts, offering tutoring services, or renting out a spare room occasionally. As long as you keep under the £1,000 annual limit, you don’t have to pay tax on this money or even tell the taxman about it.

7. Utilize Cashback and Rewards Cards

Cashback and rewards credit cards can provide a significant boost to your finances if used wisely. By earning points or cashback on everyday purchases, you can effectively reduce your outgoings. Just remember to pay off any balance in full each month to avoid interest charges. Cashback cards and apps (e.g. Jam Doughnut) are tax-free, as HMRC regard them as simply returning your own money to you.

8. Rent a Room Scheme

Under the Rent a Room Scheme, you can earn up to £7,500 per year (gross) tax-free by renting out a furnished room in your home. This is a great way to utilise extra space and generate additional income without incurring any tax liability.

9. Switch and Save

Regularly switching your utility providers, insurance, bank account and other services can save you hundreds of pounds each year. Comparison websites such as Compare the Market make it easy to find the best deals, and many offer incentives for switching. These savings are effectively tax-free boosts to your disposable income. And switching bonuses (as offered by some banks) are tax-free, as HMRC regard them as a form of cashback.

10. Sell Stuff You No Longer Need on eBay

Selling items you no longer need or use on platforms like eBay can provide a significant financial boost. The taxman allows individuals to sell personal items without paying tax on the proceeds provided it’s not done as a business. This decluttering process can turn unused possessions into tax-free cash.

Just be aware that if you buy things with the intention of reselling them, that would be seen as trading and there could be tax to pay. Also, if you sell a product for more than you originally paid for it, you could be liable for capital gains tax (CGT) if the profit made exceeds your annual CGT tax-free allowance.

Closing Thoughts

So there you are – ten ways you can boost your finances without incurring any extra tax liability. Of course, there is no guarantee that the government won’t change the law on some of these, so I will update this article if that happens. For the time being, though, I urge you to take advantage of as many of these opportunities as you can. In the current cost of living crisis, we all need to hang on to as much of our hard-earned money as possible!

As always, if you have any comments or questions about this article – or other tax-free opportunities that you think should have been covered as well – please do leave them below.

Disclaimer: I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. Everyone should do their own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss. Note also that posts on PAS may include affiliate links. If you click through and perform a qualifying transaction, I may receive a commission for introducing you. This will not affect the product or service you receive or the terms you are offered, but it does help support me in publishing PAS and paying my bills. Thank you!

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Amazon Prime Day is Almost Here!

Amazon Prime Day is Almost Here!

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A quickie today to let you know that the annual Amazon Prime Day is almost with us. It extends over two days, Tuesday 16th and Wednesday 17th July 2024.

Prime Day is a special event for Amazon Prime members only. During it Amazon offers Prime members extra savings and special offers across a wide range of TVs, smart home products, kitchen equipment, grocery, toys, fashion, furniture, everyday essentials, and more.

Some of the best deals are typically reserved for Amazon’s own products, such as their Kindle e-book readers, Amazon Echo smart speakers and Ring video doorbells and security cameras. Discounts are often in the region of 40-50 percent for these products. If you’re thinking of buying any of them, Prime Day is definitely the day – or two days – to do it.

I have been a member of Amazon Prime for almost ten years now. As a regular Amazon shopper, I find it well worth while for the free one-day delivery on millions of items alone. But as a Prime member you get access to a host of other benefits and services as well, including Amazon Prime Music and Amazon Prime Video.

If you’re thinking of joining Amazon Prime, therefore, I highly recommend doing it in the next day or two, so you can benefit from the Prime Day offers. Personally I think it’s worth it for the free delivery alone, let alone everything else that’s on offer. But if you wish, you can get a 30-day free trial now, take advantage of the Prime Day offers, and then cancel without owing any money. It’s your choice!

  • You can also see all the latest Prime Day deals by clicking here. This page also lists early deals before Prime Day itself.

As always, if you have any comments or questions about Amazon Prime or Prime Day, please do post them below.

Disclosure: This post includes affiliate links. If you click through and make a purchase, I may receive a commission for introducing you. This will not affect the price you pay or the products or services you receive.

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How to protect your savings and investments under a Labour government

How to Protect Your Savings and Investments Under a Labour Government

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For better or worse, the UK has elected a Labour government. There will undoubtedly be many changes in economic policy, taxation and regulation, which of course will affect personal finances. So today I am setting out some ways in which you may be able to safeguard your savings and investments as Labour take control.

As Pounds and Sense is aimed especially at older readers, I am obviously writing from that perspective, but many of these points will apply equally to younger people as well.

1. Diversify Your Investments

Diversification remains a cornerstone of sound investment strategy, especially in times of political uncertainty. By spreading your investments across different asset classes – such as equities, bonds and property – you can reduce the risk of any single investment adversely affecting your portfolio. Consider international diversification to hedge against domestic political risks. This means investing in global markets to mitigate potential local economic disruptions. Historically, gold and commodities can also act as a hedge against economic upheavals.

2. Understand Tax Implications

Labour governments typically lean towards higher taxes on wealth and income to fund public services. Stay informed about potential changes in tax policies, such as higher rates of capital gains tax, dividend tax or inheritance tax. To mitigate the impact:

  • Utilize ISAs and Pensions – make full use of tax-efficient accounts like Individual Savings Accounts (ISAs) and pensions, which can shield your investments from tax.
  • Consider Timing of Asset Sales – if changes in capital gains tax (CGT) are anticipated, you might want to accelerate the sale of certain assets before new rates take effect.
  • Inheritance Planning – review your estate plans and consider trusts or gifts to mitigate higher inheritance taxes.

3. Consider a Bed-and-ISA Strategy

If you hold a lot of investments outside an ISA or other tax shelter, this can be a good strategy to reduce your tax liability.

Bed-and-ISA involves selling taxable stocks and shares and then repurchasing them within an ISA wrapper. This allows you to transfer investments into a tax-protected environment, where future gains and income will be sheltered from tax. Note that you cannot transfer taxable stocks and shares directly into an ISA, but Bed-and-ISA performs the same function.

On the minus side, Bed-and-ISA may incur some costs in terms of transaction fees and any difference (spread) between selling and buying prices. You may also become liable for CGT if any profits realized exceed your annual tax-free allowance. The long-term benefits can be substantial, however. This applies especially if – as seems likely under Labour – tax-free CGT allowances are reduced and the rates payable are increased. Of course, the Conservatives have started doing this already.

  • Some Online Platforms Will Undertake Bed-and-ISA on Your Behalf – that means you don’t have to do the share selling and buying yourself. One such platform is AJ Bell. This can obviously save you a bit of time and may work out cheaper as well. Be aware that you will still have to pay some fees and charges, however, along with CGT on any capital gains above your personal allowance.
  • A Similar Option is Bed-and-SIPP – with this you sell taxable stocks and shares and then buy the same ones back within your private pension (SIPP).
  • This Strategy is Named After an Older One Called Bed-and-Breakfasting – at one time this was deployed to minimize CGT liability. The law was changed to make bed-and-breakfasting less effective, but Bed-and-ISA can still work well.
  • Bed-and-ISA Can Also Be Used to Crystallize a Loss – this can then be set against other taxable profits in the year concerned to reduce your CGT liability.
  • You Can Read More About Bed-and-ISA (and bed-and-breakfasting) in this excellent article by my friends at Nutmeg.

4. Review Your Property Investments

Property has long been a favoured investment in the UK. However, the Labour government may introduce policies adversely affecting buy-to-let investors, such as rent controls or higher taxes on second properties. To protect your property investments:

  • Assess Rental Yields and Potential Regulations – ensure your rental income can withstand potential regulatory changes.
  • Consider Property Ownership Structures – holding property through a limited company can sometimes be more tax-efficient.
  • Stay Liquid – keep some liquidity to manage any unforeseen expenses or changes in regulation.

5. Focus on Stable Income Investments

Investments that provide steady income can be particularly valuable during uncertain times. Consider:

  • Dividend-Paying Stocks – companies with a history of stable dividends can provide a reliable income stream.
  • Bonds and Fixed Income – government and high-quality corporate bonds can offer stability and predictability.
  • Infrastructure Funds – these often provide regular income and are less sensitive to economic cycles.

6. Monitor Inflation and Interest Rates

Economic policies under Labour may lead to changes in inflation and interest rates. Historically, increased government spending can drive inflation, which in turn erodes the value of savings. And if inflation rises, the Bank of England is very likely to respond by raising interest rates. To combat this:

  • Consider Inflation-Linked Investments – investments that adjust with inflation, such as inflation-linked bonds.
  • Review Savings Accounts – ensure your savings accounts offer competitive interest rates. A cash ISA will also shelter your savings from tax.
  • Consider Fixed-Rate Mortgage Deals – if interest rates rise under Labour, a fixed-rate deal on your mortgage will offer some protection.
  • Take Action on Equity Release – if you’ve been considering this, there is a case for proceeding sooner rather than later, in case long-term interest rates rise

7. Stay Informed and Flexible

The political landscape can change rapidly. Regularly review your investment portfolio and financial plans to ensure they align with current and anticipated economic policies. Consider consulting with a financial advisor who can provide tailored advice based on the latest developments. Depending on your circumstances, you may want to consult with an accountant as well.

8. Invest in Knowledge and Skills

An often-overlooked investment is in your own knowledge and skills. By staying informed about personal finance and economic policies, you can make better decisions. Attend financial planning seminars, read reputable financial news, and consider taking financial education courses. There are also some excellent personal finance websites, including Money Saving Expert, Which? Money and This Is Money. I recommend reading and following all of them.

And naturally you should keep reading Pounds and Sense as well. Why not take a moment to subscribe in the right-hand column so as never to miss any of my posts in future? ➡➡➡

Closing Thoughts

While the Labour government may introduce changes that impact savings and investments, proactive planning and informed decision-making can help protect your financial future.

By diversifying your portfolio, making good use of tax-efficient investments such as ISAs and pensions, focusing on stable income investments, and staying adaptable, you can navigate the uncertainties and safeguard your assets. Remember, the best defence is a well-thought-out strategy and staying informed about the changing economic landscape. Good luck, and I wish you every success in achieving your financial goals.

As always, if you have any comments or questions about this post, please do leave them below.

Disclaimer: I am not a qualified financial adviser and nothing in this post should be construed as personal financial advice. You should always do your own ‘due diligence’ before investing, and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

This is an updated version of my original article.

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Could You Benefit From Help to Save?

Could You Benefit From Help to Save?

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Navigating personal finances can be challenging, especially for those on a limited income. Recognising this, the UK government introduced the Help to Save scheme, which is designed to encourage and support individuals receiving certain benefits to build their savings.

Here’s an overview of how the scheme works, who is eligible, and the benefits it offers.

What is the Help to Save Scheme?

Help to Save is a government-backed savings account that offers a generous bonus to low-income earners. Launched in September 2018, the scheme aims to encourage regular savings by offering a 50% bonus on the amount saved over four years. This means that for every £1 saved, the government adds 50p, potentially providing a significant financial boost for those who participate.

Who is Eligible?

The scheme is targeted at individuals who are receiving certain benefits. Specifically, you can open a Help to Save account if you are:

  • receiving Working Tax Credit
  • entitled to Working Tax Credit and receiving Child Tax Credit
  • or claiming Universal Credit and have earned income of £722.45 or more in your last monthly assessment period

It’s important to note that you need to be living in the UK to be eligible, though if you are a Crown servant or a member of the armed forces posted overseas, you can still apply.

How Does It Work?

Once you open a Help to Save account, you can save between £1 and £50 each calendar month. The maximum you can save over four years is £2,400. You don’t have to pay in every month, and you can make multiple deposits each month, provided the total does not exceed £50.

The key feature of the scheme is the bonus structure. Here’s how it works:

  • Year 1 and 2 Bonus: After the first two years, you’ll receive a bonus of 50% of the highest balance you’ve achieved during those two years.
  • Year 3 and 4 Bonus: At the end of the fourth year, you’ll receive another 50% bonus on the difference between the highest balance you’ve achieved in the second two years and the highest balance in the first two years.

This means you could earn up to £1,200 in bonuses over the four years if you save the maximum amount. No other savings scheme can come close to beating this.

Are There Any Age Limits for Help to Save?

One of the appealing aspects of the Help to Save scheme is its inclusivity in terms of age. There are no specific age restrictions for opening a Help to Save account, provided you meet the eligibility criteria related to benefits and the general requirement of living in the UK (unless you are a Crown servant or a member of the armed forces posted overseas).

Theoretically there is no upper age limit for Help to Save, but all the qualifying benefits do require you to be earning some work-related income. So if you are retired and living entirely off your pensions and benefits you are unlikely to qualify. If in any doubt, however, you can always apply anyway and see what response you receive.

Why Should You Consider It?

The Help to Save scheme provides a risk-free way to build a financial cushion. The bonuses are guaranteed and tax-free, which makes it an attractive option for those looking to save a small amount regularly without any risk of losing their money.

Additionally, the flexibility of the scheme allows you to save what you can, when you can. There is no penalty for missing a month or for withdrawing your money. However, frequent withdrawals might impact the bonuses, as they are calculated based on the highest balance achieved.

How to Apply

Opening a Help to Save account is straightforward. You can apply online via the official government website or through the HMRC app. To apply, you will need a Government Gateway User ID and password. If you don’t have one, you can create one during the application process.

Closing Thoughts

For those receiving eligible benefits, the Help to Save scheme offers a valuable opportunity to build a savings pot with the added advantage of tax-free government bonuses. It’s designed to be simple and flexible, making it easier for individuals to develop a habit of saving and improve their financial security. If you qualify, it’s certainly worth considering as a step towards a more stable financial future.

For more information and to apply, visit the official Help to Save website.

 As always, if you have any comments or questions about this post, please do leave them below.
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Review: The New Trading 212 Cash ISA

Review: The New Trading 212 Cash ISA

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Updated 19 February 2025

Trading 212, a well-known platform in the UK for trading stocks and shares, recently introduced a new product to its lineup: the Trading 212 Cash ISA.

This addition comes as part of the company’s efforts to diversify its offerings and cater to a broader range of financial needs. Today I’ll be delving into the details of this new product, highlighting its pros and cons. I’ll also reveal why I decided to open a Trading 212 Cash ISA myself.

Let’s start with the basics though…

What is a Cash ISA?

A Cash ISA (Individual Savings Account) is a tax-free savings account where the interest earned is not subject to income tax. Each tax year, individuals can deposit up to a certain limit, which for the 2024/25 tax year is £20,000. Cash ISAs are a popular choice for those looking to save money without the risk associated with investments in the stock market.

Pros and Cons of the Trading 212 Cash ISA

Pros

  1. Tax-Free Interest: Like all ISAs, the interest earned in a Trading 212 Cash ISA is completely tax-free. This makes it an attractive option for savers looking to maximize their returns without the burden of paying income tax on their earnings.
  2. Competitive Interest Rate: The current rate is 4.9% per annum, which puts it at or near the top of the Best Buy tables. Rates are variable and can fluctuate based on market conditions, so it’s possible they will fall in future (UPDATE: The rate is falling to 4.5% from 1st March 2025). The platform will want to remain competitive with other financial institutions, however.
  3. No Fees: The Trading 212 Cash ISA is an entirely fee-free account.
  4. User-Friendly Platform: Trading 212 is known for its intuitive and user-friendly interface. The same ease of use applies to their Cash ISA, making it simple for users to manage their savings, check balances and track interest earned. You can manage your account via the Trading 212 website or an app on your phone.
  5. Low Minimum Investment: You can start with as little as £1 if you like. There is no upper limit other than the annual £20,000 ISA allowance (for all ISAs you hold).
  6. Security: Funds held in a Trading 212 Cash ISA are protected under the Financial Services Compensation Scheme (FSCS) up to £85,000 per individual. This provides peace of mind to savers, knowing their money is secure.
  7. Accessibility: You can withdraw whenever you want and as often as you want.
  8. Daily Interest Payments: Interest is credited to your account daily and added to your account at the end of each month (before that it is shown as ‘pending’). There is no need to wait up to a year to receive interest as with some other savings accounts.
  9. Integration with Other Products: For existing Trading 212 users, the Cash ISA seamlessly integrates with other accounts and products on the platform such as the Trading 212 Stocks and Shares ISA and general investment account.
  10. Easy Transfers: You can transfer in your ISA from another provider and you’ll be able to freely transfer between your Trading 212 Stocks and Shares ISA as well.
  11. Flexible ISA: You can withdraw from it and return your funds in the same tax year without it counting twice against your annual ISA allowance. For example, if you invest £10,000 and then withdraw £5,000, you can still invest £15,000 in that tax year (the remaining £10,000 of your £20,000 allowance plus return of the £5,000 you withdrew). Not all cash ISAs currently offer this.

Cons

  1. Interest Rate Variability: As mentioned above, while Trading 212 currently offers a competitive rate, this may change and it may not always be the highest on the market. It’s always a good idea to compare rates with other providers to ensure you are getting the best deal. That obviously applies especially if you are reading this article some time after it was first published (though I will endeavour to update it from time to time).
  2. Not Instant Access: You can withdraw money any time via the website or app but it may take up to three days to arrive in your bank account. So it is quick access but not instant.
  3. No High Street Presence: Trading 212 operates entirely online. They do have a customer service department which you can contact by phone or email. They are not set up to provide telephone banking, though.
  4. Limited Track Record: As a fairly new product, the Trading 212 Cash ISA does not have a long track record. Some more cautious savers might prefer established Cash ISA providers with a proven history.
  5. No Investment Growth: Unlike a Stocks and Shares ISA, a Cash ISA does not offer the potential for investment growth. While it is safer, it may yield lower returns in the long term compared with investment-based ISAs. Of course, there is no reason why you can’t have both.
  6. Inflation Risk: The interest earned on a Cash ISA may not always keep pace with inflation, potentially diminishing the real value of savings over time.
  7. Contribution Limits: The annual contribution limit of £20,000 applies across all ISAs. If you are already investing in a Stocks and Shares ISA or other type of ISA, the amount you can contribute to a Cash ISA will be reduced.

APR vs APY

One other thing to note is that the interest rate quoted by Trading 212 is described as APY. This is short for annual percentage yield. This is another term for AER (annual equivalent rate) which I discussed a while ago in this blog post.

What this means is that the rate quoted by Trading 212 – currently 4.9% – incorporates the compounding of interest payments. As mentioned above, in the Trading 212 Cash ISA interest is credited daily, and once it is in your account you get interest on the interest as well. That is obviously a good thing, but it does mean the advertised 4.9% APY already accounts for this. If the interest rate was quoted instead as an APR, it would actually be slightly lower (about 4.8%).

Does this matter? Well, yes and no. If you keep your money in the account for a full year, you will get the full rate of interest quoted (as APY). But if you withdraw it earlier – after six months, say – you won’t receive exactly half of this, as the compounding effect won’t have had as long to work. So instead of half the quoted 4.9% (currently) for six months, you would receive marginally less. It would only make a very small difference, but is worth bearing in mind if you are saving for a short-term goal in particular.

My Own Example

As mentioned above, I have opened a Trading 212 Cash ISA myself. I already had a Trading 212 General Investment account, so that made the decision easier. But I was also attracted by the competitive interest rate and the fact that interest was calculated daily.

A further consideration is that from this year there is no limit to the number of different ISAs you can open (as long as you don’t exceed the overall £20,000 annual limit). So opening a Trading 212 Cash ISA this year doesn’t preclude opening another Cash ISA with a different provider later in the year if circumstances change. It is also easier now to transfer money from one ISA to another.

I currently have a Santander Edge account which comes with a linked Edge Savings account (non-ISA) paying a market-leading 7% (AER) on balances of up to £4,000. I have maxed this out, however, so was looking for an alternative, tax-efficient home for the balance of my short- to medium-term savings (the other savings offers from Santander are a lot less appealing). The Trading 212 Cash ISA seemed ideal for me, therefore. I started by depositing £25 and as that went fine I then added another £1,000. Interest has been credited every day as promised, and as of 19 February 2025 my original £1,025 has grown to £1,569.68 (see screen capture below). Note that the total quoted includes £3.90 in pending interest accrued so far during February, which (as mentioned above) will be credited to my account at the end of the month.

T212CashISAFeb25

Conclusion

In my view, the new Trading 212 Cash ISA is an enticing addition to the range of financial products available to UK savers.

It combines the tax-free benefits of a traditional ISA with the user-friendly experience Trading 212 is known for. And the interest rate (at present anyway) is very competitive. But obviously you should weigh up the pros and cons set out above carefully before deciding if it’s right for you. As always, it’s wise to compare options and consider your financial goals – both short and longer term – before proceeding.

As always, if you have any comments or questions about this post, please do leave them below.

Disclaimer: I am not a professional financial adviser and nothing in this post should be construed as personal financial advice. You should always do your own ‘due diligence’ before investing and take professional advice if in any doubt how best to proceed.

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7 Top Tips for Money Saving Websites

Guest Post: 7 Top Money-Saving Websites for Freebies

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Today I have another guest post for you on the subject of saving money and getting freebies 🙂

My friends at Hot Free Stuff have put together this list of seven top money-saving websites where you can get freebies, discount codes, downloadable coupons, and more.  Check them out, and don’t forget to sign up for free emails from Hot Free Stuff to get all the latest free offers daily!

 

Are you a stressed-out mum (or dad) trying to make the family budget work?

It takes juggling to make the household budget balance without the need for taking a calculator on every shopping trip. That is because just a click of your mouse or a swipe of your tablet can reel in huge savings on credit card bills, home goods, fashion, electricity, and fun-filled family activities!

We have done the work of trawling the Internet to find you seven of the best money-saving websites around. We’ll help you get freebies, codes, downloadable coupons and more, so that you can do more with your budget every week. Here is our point-and-click guide to savings…

HotFreeStuff.co.uk
This site gets you access to lots of free samples you can really use, from lotions to perfumes. Save money using this site on lots of household goods and get a chance to try new products for free as soon as they are available.

Gumtree
At this so-called ‘classified community’ you can snap up lots of great deals on pets to property. There are many listings for rentals and jobs throughout the UK and Ireland. You will enjoy the deals, but you can also get free items via the freebies section. Just scroll beyond the ads and sponsor links to find many free listings for household items and furniture. At the time of writing there were listings on the London site for free sofas and mattresses, a working Hotpoint fridge-freezer, and free haircuts. Just a word of caution – we suggest for any classified site that you take someone along with you to collect any items, and be careful about giving away too much personal info when responding to ads.

HotUKDeals
This site has been around for well over a decade and is the most reputable place for people to share information on the freebies and discounts they have picked up on their website travels. It is free to register and features include ‘Top 10 Hottest Offers’, requests for offers, and fun, free competitions to enter.

My Voucher Codes
Get over 2000 discount codes at Britain’s biggest voucher website. Tabs include top listings as well as categories, together with the ability to print out vouchers.

Groupon
Never underestimate the power of Groupon! Many times it can seem like a venue for free or cut-price beauty treatments. There are, however, great deals on family attractions, meals and holiday getaways as well.

Moneysaving Expert (MSE)
This massive site set up by financial journalist Martin Lewis has saved the UK millions. It is clearly written, easy to understand, and has lots of information on getting deals on everything from home and car insurance to broadband and mortgages.

Travel Supermarket
This is the best site to find travel deals and compare flights and hotel offers in one easy-to-navigate resource.

 

Many thanks to Hot Free Stuff for sharing their advice and information. If you have any comments or questions – or other tips and resources for saving money – please do share them below as usual.

Hot Free Stuff

Disclosure: this is a sponsored post.

 

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Guest Post: Six Tips for Getting Free Stuff Without Dealing With Scams

Guest Post: Six Tips for Getting Free Stuff Without Dealing With Scams

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Today I have a guest post for you on a subject I’m sure will resonate with many Pounds and Sense readers.

We all love a freebie, but how do you ensure that by providing your details you aren’t opening the floodgates to a torrent of spam? Read and follow the tips below from my friends at All Free Stuff. And don’t forget to sign up for their free email newsletter to get details of all the latest free offers daily!

 

It’s completely possible for you to get free stuff. There are plenty of opportunities out there.

That said, for every legitimately free thing you can get, there are two complete scams set up to get your personal information at the cost of a few free samples. If you want to get free stuff without dealing with scams, try the following steps.

1. Set up a ‘spam catcher’ e-mail. This e-mail account is one you have no plans on using for normal correspondence, but rather the address you give out for giveaways and promotions. You can also use it when you register with a company that wants your e-mail address in exchange for free gifts. If you give the company your primary e-mail address, you’ll be swamped with a mass of promotional e-mails. It won’t take long for you to abandon your e-mail account in despair if this starts to happen.

2. Avoid giving personal information. You should never give out more than your name, e-mail address, physical address, and birthday. And you should be careful about giving away all of those, as well. If you can, try using a fake name or a PO Box. The more personal information you give out, the easier it will be for other companies to get that information. In addition, some websites ask for your credit card number ‘just to ensure you’re a real person’. Once they have your credit card information, you can’t make them forget it.

3. Be realistic about what you expect. If the deal seems too good to be true, it almost certainly is. It’s certainly possible the giveaway is legitimate, and if that’s the case then they should have company contact information readily available. You should also check the internet to see if you can find information. If the offer is that great, then plenty of people will be talking about it. Of course, if it’s a scam you’re liable to find discussion about that, too.

4. Visit only legitimate websites for samples. Manufacturers’ sites are generally trustworthy, whereas some retail-specific sites are not.

5. Write to the manufacturers of products you enjoy using. Companies are always happy to give a few freebies to customers willing to go out of their way to make their voice heard. It builds goodwill and often garners more customers. And all for the cost of a few free samples.

6. Learn to use coupons properly. It can take a huge amount of patience to learn to coupon well. That said, good couponing can save you so much you may even get free groceries. Couponing is a fairly big deal, so you can find plenty of websites that can help you learn. There are also many grocery stores or manufacturer sites that will keep you informed of what great deals and amazing coupons are available.

These are some of the best ways to get free stuff without dealing with scams. Do you have any other tips yourself? Please do leave them below!

Disclosure: This is a sponsored post.

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Secret Savings Accounts

Saving for a Rainy Day or a Stormy Breakup? The Surprising Facts About Secret Savings Accounts

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A recent study conducted by Smart Money People reveals that one in ten people in a serious relationship, including marriage, civil partnerships, or cohabitation, maintain a secret savings account.

The research for the study was undertaken by Opinium on behalf of Smart Money People from 12 to 16 January 2024 among 2,000 UK adults aged 18 and over.

The SMP study highlights the prevalence of this practice among those in their 30s, with 30% acknowledging having such an account. Additionally, women are reported to be more likely than men to save secretly, indicating potential gender-related financial dynamics within relationships.

The reasons for maintaining a secret savings account vary, with the most common explanations being that individuals already had the account before entering the relationship (38%) or the desire to maintain financial independence (37%). However, a surprising 22% of respondents with a secret savings account admit to using it as an emergency break-up fund, anticipating potential costs associated with leaving a relationship, such as moving expenses or repurchasing shared assets like a car.

Interestingly, over half (51%) of those with a break-up fund also have a joint savings account with someone other than their partner, introducing an additional layer of complexity to the financial dynamics within relationships.

The study sheds light on the impact of financial matters on relationship stability, revealing that 18% of adults believe a lack of financial compatibility has contributed to a break-up in the past. The biggest savings-related causes of friction for those currently in a relationship are having different opinions on savings habits or when it’s okay to use savings (28%). This underscores the importance of aligning financial goals and strategies within a relationship.

Financial compatibility is considered crucial by 95% of couples living together, emphasizing the significance of shared financial values. Despite this, 10% of individuals still maintain secret savings accounts, illustrating a potential disparity between stated beliefs and actual financial behaviour.

The study indicates that half of people in relationships do not save the same amount of money as their partner, primarily due to unequal earnings (65%). An additional one-third attribute the difference in savings to disparate spending habits, with 40% of these individuals maintaining secret savings accounts.

In terms of relationship longevity, the research suggests that couples with joint savings accounts feel more financially compatible (90%) compared to those without. The data encourages open and honest discussions about money within relationships, emphasizing the importance of navigating financial decisions together.

Commenting on the findings, Jacqueline Dewey, CEO of Smart Money People, said, “Many people may already have methods of saving that work well for them prior to a new relationship, so although long-term partnerships bring about new joint financial goals, this shouldn’t negate any personal goals for each individual.

“Having different outlooks and opinions on savings isn’t necessarily a deal-breaker, but finding the most suitable ways to manage this is important.”

In summary, the SMP study highlights the complexities of financial dynamics within relationships, emphasizing the need for open communication, shared financial goals and mutual understanding, in order to maintain a healthy and long-lasting partnership.

Many thanks to my friends at Smart Money People for allowing me to share the results of their research. You can check out Smart Money People’s guide to the best savings accounts here.

If you have any comments or questions about this article, please do share them below as usual.

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AER

What is AER and Why is it Important to Savers and Investors?

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I recently posted about the importance of compounding to investors. In the article I pointed out that compounding, when combined with the magic of compound interest, is a powerful tool for building wealth and long-term financial success.

Compounding involves earning interest on both your initial investment and the accumulated interest from previous periods. In other words, it’s the process of generating earnings from an asset’s reinvested earnings. The more frequently your money is compounded, the faster it grows. And the longer your money remains invested, the more significant the compounding effect becomes.

A reader asked me if the effect of compounding is equivalent to getting a higher annual interest rate. The answer to that is yes, if interest is compounded more than once a year. The more times per year interest is compounded, the higher the effective annual rate becomes. The official term for this is AER, or annual equivalent rate.

In this article I thought I would explain AER in a bit more detail, as it is a very important concept for savers and investors to grasp.

What is AER?

Annual Equivalent Rate (AER) is a standardized way of expressing the interest rate on savings or investment products over a one-year period. It allows investors to compare the potential returns on different financial products on a like-for-like basis. AER takes into account the effect of compounding, providing a more accurate representation of the overall return on an investment.

Why is AER Important?

AER is crucial for investors as it helps them make more informed decisions when comparing different savings and investment options. While nominal interest rates may seem attractive at first glance, they can be misleading. AER provides a more accurate reflection of the actual return on an investment by factoring in the compounding of interest over time.

Example

Let’s consider two savings accounts:

  1. Savings Account A offers a nominal interest rate of 7% per annum, compounded annually.
  2. Savings Account B offers a nominal interest rate of 7% per annum, compounded quarterly.

To compare these accounts accurately, we can use the AER formula:

AERformula

Where:

  • is the nominal interest rate (as a decimal)
  • is the number of compounding periods per year

For Account A:

For Account B:Capture B7

In this example, even though both accounts have the same nominal interest rate, Account B has a higher AER due to the more frequent compounding.

Let’s now add a third savings account, Account C, again with a nominal annual interest rate of 7% but this time compounded monthly. We can calculate the AER for Account C using the formula as before:

Formula C7

As you can see, the AER is higher again due to the increased frequency of compounding. If compounding was even more frequent (e.g. daily) the difference would be even more pronounced. In addition, the longer the period over which you invest, the greater the difference frequency of compounding will make.

While AER is often considered with regard to savings accounts, it also applies to investments. As I said in my earlier post, with a property crowdlending platform like Assetz Exchange [referral link] which pays monthly dividends (and has low minimum investments), you can keep reinvesting the income you receive to boost the returns you make.

Closing Thoughts

Understanding AER is crucial for UK savers and investors as it provides a standardized measure to compare the true potential returns of different financial products.

By taking into account the compounding effect, AER offers a more accurate picture of overall returns on investments. When evaluating savings or investment opportunities, always look beyond nominal interest rates and consider the AER to make informed decisions that align with your financial goals. And take any opportunity that arises to reinvest your returns to harness the power of compounding to grow your wealth faster.

As ever, if you have any comments or questions about this post, please do leave them below.

Disclaimer: I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. Everyone should do their own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

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