I have a sum of money which may be required for a house move in the next 6-12 months. Obviously I don’t want to take any equity risk with this sum, so conventional wisdom is that a high interest cash savings account would be the best place to store this. However, I’m a 45% taxpayer so the after tax interest rates on even the “best buy” savings accounts is well below inflation. I’ve maxed out my Premium Bond allowance so now considering buying low yielding gilts to benefit from tax-free capital appreciation and minimal interest payable on the coupons.

For example the T26 gilt maturing 30/1/26 currently trades around 92p. When it matures in two years’ time it will be redeemed at 100p, so yield to maturity is roughly 4% tax free. The coupon is 0.125% so negligible in the scheme of things.

Obviously the price could fluctuate if I need to access the money before maturity, but I know short dated gilts are less sensitive to interest rates that long gilts, so I’m not too concerned about this risk. Is there anything else I’m missing? Are there any other alternatives for holding a cash sum which might be required in the near term?