In a recent move, Santander have tripled the amount of cash back available to customers taking out their ‘Preferred Current Account‘, making the gap between it and it’s competitors even greater.

With very few accounts offering a money back scheme, this sets Santander apart from the rest of the market and gives potential customers a very big incentive to reel them in.

However, this fantastic offer is not available to everybody as there are certain limitations to applying for this cash back amount. With Santander’s preferred current account there are 3 levels of cash back that are available.

For all new customers, instead of the top £300 cash back offer you will only be given a £100 reward. This level is available to anyone who switches to Santander’s current account and can pay in £1000 a month.

Their second level comes with a slight restriction on those who can apply. To gain the medium level, £200 cash back, you must first possess a Santander Mortgage dating back to August 2011. This is great news if you are looking to switch your current account to the same bank that you have your mortgage, but bad news if you don’t as you are excluded from the top two tiers of this cash back scheme.

And then we come to the grand prize, the £300 cash back level. For this you will need everything that was required for level 2, as well as a Savings Account with Santander containing £10,000. However, unlike with the mortgage requirement, you do not need to have a pre-existing savings account. This must be deposited, and still held, exactly 13 weeks after you open your current account.

With all of these rules that you must adhere to in order to gain your £300 cash back, it may prove easier to simply go with the lower level of account.

But if you have fulfilled the criteria to get this top level of cash back, it could be very rewarding to switch to Santander.

The firm has revealed that interest rates paid on fixed rate bonds with relatively short fixed terms have been rising since last August.

However, despite increasing rates savers are still worse off than they have been in recent years as decent returns are still had to come by due to record lows to the Bank of England base rate which has been sat at 0.5% since March 2009.

The encouraging movement suggests the Bank rate will rise in the coming months which would be passed on to savers through improved returns on savings accounts.

According to Moneyfacts, savers can expect to lock in on a rate of 2.85% with the average one-year fixed rate bond which marks the highest levels in over a year.Savers seeking the best rates might want to consider a two-year bond, which currently pays an average of 3.42%. Go one step further with a three year fixed term and you could be earning a rate of 3.7%, and for the highest rates available, a five year bond for an average interest rate of 4.17%.

Michelle Slade, of Moneyfacts said that short term bonds are seeing the most significant increases and are currently the most popular bonds amongst savers.

However, she added that savers must ensure that this type of savings accounts is the best option for them before committing to a fixed rate bond, as making early withdrawals could lead to hefty penalties.

By Sam Gooch

Topping up your ISA

With this years tax year ending on Tuesday (5 April), savers have been reminded that they have until this date to use up the remainder of their tax free ISA allowance – or they will lose it.

However, as tempting as it is to leave this until the last minute it is not advisable, as many banks offering the best ISA rates will soon run out of budget and be forced to pull these high paying accounts before the deadline.

All savers in the UK currently have an annual tax free savings break of £10,200, half of which can be set aside into cash ISA and the rest (or up to the full £10,200) into investment ISAs.This limit will rise by £480 in line with inflation at the beginning of the new tax year (6 April) to £10,680, so savers will soon be able to put up to £5,340 into cash ISAs every year.

There are a number of different types of cash ISAs available on today’s savings market, each coming with a different set of rates and restrictions, so the rate you get  will depend on which account you choose based on your saving needs.

If you are happy to lock your savings away for an extended period of time you can generally qualify for higher rates. However, these rates are not affected by changes made to the Bank of England base rate, so if  rates go up across the board you may find yourself locked in at a rate that falls below average.

This can of course work the other way, so if savers can position themselves with a decent ISA when the base rate peaks, they will enjoy higher rates than those offered to new customers either for the duration of the account, or until rates begin to increase.

Halifax currently offers an instant access ISA at the top end of the ISA tables, paying a rate of 3%. The Halifax ISA allows customers to make up to make up to 4 withdrawals per year and existing cash ISAs can be transferred across.

Nationwide is also offering 3.10% on its instant access cash ISA. The Nationwide ISA comes with no withdrawal restrictions and gives account holders the ability to transfer existing cash ISAs.

However, this ISA is only available to existing Nationwide customers, so if you don’t currently bank with Nationwide you would need to open a bank account or savings account with the building society.

If you are keen to make the most of your tax free savings allowance you should consider the share dealing ISA option. These accounts allow investors to benefit from 100% tax free returns on earnings.

Share dealing accounts offer the potential to provide far greater returns than any of their cash counterparts, but with any stocks and shares investment comes an element of risk, so you must be ready to take a gamble.

More and more banks and building societies are now offering share dealing accounts, many of which incorporate the ISA wrapper, so there is an ever-growing array of choice for investors.

Higher-rate tax payers have been hit hard as a result of the National Savings and Investment’s withdrawing its tax-free index-linked certificates, as it was previously offering the equivalent taxable gross return of 10% providing that the current Retail Prices Index (RPI) rate stayed at 5%, giving savers more than double the returns that any standard savings accounts can offer.

An NS&I spokesman recently made an appearance on BBC Radio 4′s Money Box programme, and he said it was unlikely that another issue of index-linked certificate would be launched this year. However he denied that NS&I had any plans for future issues to track the generally lower Consumer Prices Index (CPI) instead of the RPI.

The Bank of England base rate has remained at its record low of 0.5% for more than 16 months now – and one economic forecasting group said it expects the rate to stay at this level until 2014 – which means most savings accounts are now actually losing money in real terms based on RPI inflation.

Some shares offer high dividend yields and those looking to invest small amounts can protect their returns from income tax by making use of their stocks and shares ISA allowance. However, there is no guarantee that you will earn any returns from shares, so there are risks involved, as we all know that share prices can increase and decrease depending on business performance.

If you have a savings account, check that you are getting a competitive rate. You may have initially opened it with an attractive rate, but most savings accounts offer introductory bonus rates that are valid for 12 months. After this period the rate paid on your funds can be significantly lower, so it’s important to keep an eye on your account and keep it competitive.

Also, rates tend to fluctuate based on the Bank of England rate, so once this begins to rise you should keep a close eye on the savings market. If you find you could be earning more, switch account – it’s much easier than you may think and banks are set up to welcome new customers so it is in their best interest to make the switch-over as smooth as possible.

If you’re looking for the best interest rates around and you’re happy to save in an account that reduces access by lowering of stopping withdrawals all together for a fixed period of time, you might wish to consider fixed rate bonds. These savings accounts allow you to fix a rate for an extended period of time (usually between 1 and 5 years) while fixing the period of time you effectively lose access funds. Leaving your funds untouched not only allows you to earn some great returns, but also gives give you more of an incentive to leave your savings to grow, while protecting them from being eroded by inflation.

If you require access to your funds due to unforeseen circumstances you can withdraw funds, however you will lose some or all of the interest.

The highest paying bond in our tables is currently the ICICI fixed rate bond, currently offering 4.75% on all funds from £1000 with no maximum. However this account requires you to leave your funds untouched for a 5 year period, so if this sounds like a long time to you, you can opt for a shorter term with a lower rate.

Although the UK banking crisis has settled down now, you should still spread your savings around to ensure they are 100% protected – never invest more than £50,000 (the limit covered by the Financial Services Compensation Scheme) with a single provider or financial institution, and be sure to check multiple banks do not fall under the same financial umbrella, as you may find that your group chosen banks only offer a single protection allowance between them.

If you really want to be clever about it you would be better to work to a limit of around £48,000 as this will allow any interest you earn to also be covered if your bank were to fail.

In addition, higher rate on dividends will move from 32.5% to 42.5% of the grossed up income (equivalent to 36.11% of the net dividend) for taxable income above £150,000.

As a result of the changes to become effective from 6 April, private banks and wealth managers have been advising those who will be affected to act now in order to protect their income. Many are taking steps to bring forward earnings to this tax year, or plan their finances in an attempt to lower the impact.

Below are some tips outlined by Which4U that higher earners should consider:

1. Make full use of all your tax allowances Many of us complain about how much tax we pay, but forget to take advantage of tax free breaks. The truth is, many of us could be missing a trick when it comes to tax relief.Always ensure you have used up your allowances by the end of every tax year. A popular tax free savings incentive is your first port of call, in the form of individual savings accounts (Isas), with an annual allowance of £10,200 (or £7,200 for those under 50 until April 6th), as well as tax-free National Savings & Investments products.No income tax is required to be paid for any interest or capital gains earned using Isas, so make sure you shop around to find the best Isa rates, or alternatively if you wish to invest in a stocks and shares Isa, do some research into the market.Transfer investments that provide an income to your spouse, if he or she does not work or has earnings that fall in a lower tax band. This now not only applies to spouses on the basic rate tax but also those paying 40%, if the other spouse currently earns above £150,000 per year.
2. Close your bank account According to advisers at Deloitte, those that have a savings account paying interest on an annual basis that is due to be paid after April, should consider closing the account before the new tax rules kick-in in, allowing the interest payment to be subject to a lower rate of income tax. After, you can simply open a new bank account.
3. Donate to charity in the new tax year After 6 April, high earners making donations using the Gift Aid scheme will qualify for higher tax relief, which means that more money will be given to the charity. However, you should think about the potential impact delaying your regular donations could have on the charity, especially in the current financial climate.
4. Accelerate your income Some employers have chosen to pay employees their salaries early to avoid the higher tax. Consider asking your employer if this is a possibility. This may be easier for those in entrepreneurial or family businesses.You can also make use of any share options you currently hold, as these attract income tax so you will pay the lower rate. Those already getting pension income are able to opt to receive annual payouts as a lump sum before the changeover date in April.
5. Add more to your pension fund in the new tax yearIt has become apparent that pensions are looking more of an unattractive option to higher earners, with tax relief cut to 20% on some contributions.However, if you do fall into this category, you may want to act fast. In the 2010/2011 tax year, those earning more than £150,000 will be eligible to put in at least £20,000 and up to £30,000 with 50% tax relief, before the new restrictions come into play in 2011.Advisers at Deloitte have suggested that people earning between £100,000 and £113,000 – who will effectively be paying 60% tax from April as a result of their personal allowance also being eroded – should also add to their pensions.
6. Consider venture capital trusts (VCTs) Although these start-up investment schemes can be quite risky, they are being labelled as an alternative to a pension fund for higher earners because contributions attract 30% tax on the way in.
7. Move your assets into an offshore bondOffshore bonds are investment bonds that are operated by life insurance companies and also have some life insurance attached to them. This enables you to avoid paying any tax until you encash the bond. The idea is that by the time you come to encash the bond, you may be subject to a lower rate of income tax, for example when you’re retired – or if you have become an expat or a non-dom, you may not have to pay any UK tax whatsoever. Many well known financial advisers are using this approach for clients.
8. Change from income investments to Capital Gains Tax In 2008, capital gains tax was lowered to 18%, and investors have since been looking to acquire returns that are taxed as capital gains rather than income. According to advisers, the 50% income tax band has sped-up this switch. Over the past year, demand for products such as zero dividend preference shares has significantly risen, as well as funds that work on a total return basis instead of generating income, such as absolute return funds.
9. Consider leaving the countryThis may seem like a rather extreme measure – but advisers at Cazenove and Schroders Private Bank have said that many of their clients are considering this option in response to the substantial tax demands.

   By Sam Gooch

The Egg savings account was launched today (June 26th), as its new Bonus Savings Account, allowing customers to open an account with an initial balance of at least £1 and is available to both new and existing Egg customers.

This savings account offers an interest rate of 2.8%, which includes a fixed savings rate bonus of 1.55 per cent for the first 12 months.

Furthermore, egg savings accounts do not come with any limits or charges on cash withdrawals.

Sharon Maguire, head of banking products for Egg, states: “During times of unprecedented low interest rates, customers need to have the peace of mind that their savings account is making their money stretch further.”

Those on the search for an online savings account may also wish to consider the second issue of the Principality e-Saver, launched earlier this month.