My 6.2% one-year NS&I bond is coming to an end – where should I put my money now?

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I took out the NS&I fixed rate Guaranteed Growth Bond paying 6.2 per cent almost a year ago and it is about to mature.

I put £30,000 into it as it was a top rate at the time, and would now like to reinvest the money into another fixed rate savings account.

I realize rates have gone down, but what are the best deals I can get? Should I try using a cash Isa for some of the money as I haven’t paid anything into an Isa yet this year?

Helen Kirrane from This is Money responds: When NS&I launched its successful one-year Guaranteed Income and Growth Bonds, paying 6.2 per cent in September last year, they blew the competition out of the water.

No other provider was able to offer a close rate.

The result was that 225,000 eager savers like you rushed to accumulate £10 billion of savings in the bonds.

NS&I withdrew the best-selling bonds six weeks after their launch, meaning the last of these accounts will mature on Sunday, October 6.

At a rate of 6.2 per cent over a year, your £30,000 investment will have generated an attractive £1,913.78, according to This is Money’s savings calculator – something not to be sniffed at.

He said he wants to reinvest his money in a one-year fixed-rate bond. They have now fallen somewhat from the August 2023 highs, but still offer more than in the past.

The best one-year bond on This is Money’s independent savings tables now pays 4.95 per cent. It is offered by Union Bank of India.

If you reinvested your £31,913.78 into this account, after a year you would earn £1,616.07 interest and be worth £33,529.85.

Other top one-year bonuses come from Access Bank, which pays 4.8 per cent, and Smartsave Bank, which offers 4.78 per cent.

Opening an account with a savings platform can generate even better rates than opening an account directly with a savings provider.

Platform Thrive Currently offering improved savings rates. At the moment, the best one-year solution offered is that offered by Al Rayan Bank, which pays 5.05 percent.

If you reinvested your savings into this account, they would earn £1,649.48 interest after a year and would be worth £33,563.26.

The underlying rate on this account is 4.8 percent and an increase of 0.25 percent will be paid when the account matures.

A word of caution on all this, though: as you pointed out, you haven’t used any of your Isa allowance for this year and I’d urge you to do so before you pile all your money into a new one-year bonus.

The reason is that you will probably be one of the 2.1 million savers who pay taxes on the interest accumulated on their savings.

This is due to high savings rates and something called the Personal Savings Allowance (PSA), which sets how much interest savers can earn before having to pay tax.

You’ll get £1,000 tax-free interest if you’re a basic rate taxpayer, £500 tax-free interest if you’re a higher rate taxpayer and £0 tax-free interest if you’re an additional rate taxpayer.

You pay taxes on anything over your PSA at your normal tax rate: 20 percent, 40 percent or 45 percent.

Your savings earned £1,913.78 on the one-year NS&I bonus, so if you are a basic rate taxpayer you would have to pay 20 per cent tax on £913.78 for a tax bill of £182.75 .

If you are a higher rate taxpayer your tax bill would be £565.5 and if you are an additional rate taxpayer, as you have no personal savings allowance, you will pay £861.2.

That’s why using your Isa allowance is crucial – if you have the money to do so – as all the interest your savings earn in an Isa is completely tax-free.

For example, if you put £20,000 of your savings into the best cash Isa, which currently offers Trading 212 pays a market-leading 5.1 percent*you would earn around £1,044.18 interest free.

If you put the remaining £11,913.78 of your savings into Prosper’s one-year fix through Al Rayan at 5.05 per cent, you would earn £609.77. This is less than the £1,000 PSA, so you would not pay tax on this if you are a basic rate taxpayer.

If you are a higher rate taxpayer, you would pay 40 per cent on the amount over £500 for a (much reduced) tax bill of £43.9.

Another benefit of the Trading 212 Cash Isa is that it is a flexible Isa, meaning you can turn to the Isa to withdraw money if you need to. You can replace it without depleting your Isa allowance, as long as you replace the money within the same tax year.

This is a great benefit for those who have the financial ability to use their full Isa allowance.

> See these are the five best Money Cash Isas here