Max your cash

He says: "Following a divorce, we have sold a property in Hackney and I have £550,000 cash after extinguishing the mortgage. I am renting for six months to give me time to look around for a suitable property to buy in this area. What is the best safe haven for the money over this period?"

The best safe haven in this situation is definitely cash, according to Danny Cox, chartered financial planner at Hargreaves Lansdown. Riskier investments, including bonds and equities, could lose their value over that period and if you can't leave them for longer to recover their value you could be forced to cash them in at a loss. This also applies to money being held for slightly longer periods such as 12 months.

And everyone should hold some cash alongside other investments: advisers suggest that you have three to six months of your monthly salary in easily accessible cash. Mr Cox adds that in the case of this reader - money waiting to be used for an imminent home purchase - it is also better to have it easily accessible.

Just as with other investments, though, it is important to put your cash in the right places to get the most out of it.

With a large sum such as £550,000, you could put £50,000 (the maximum amount permissible) into the National Savings & Investments (N&SI) Premium Bonds which offer a chance to win more than two million prizes of between £25 and £100,000, and two £1m prizes, in a monthly draw. Any winnings are free from UK income tax and capital gains tax (CGT). Premium Bonds provide a high degree of capital security because NS&I is backed by HM Treasury.

Premium bonds do not pay any interest, however, so are subject to inflation erosion. "However, inflation is near flat so you don't need to be too concerned about your savings being eroded in the short term," says Lauren Peters, wealth management adviser at Helm Godfrey.

Isa priorities

The next port of call is an individual savings account (Isa), if you have not already used up your annual £15,240 allowance. And then in the new tax year - in less than two months - you will be able to shelter another £15,240. You can also switch your savings between cash and stocks and shares Isas, giving you greater flexibility should your circumstances change.

However, if you have other high interest bearing investments, it could be worth sheltering these before cash. From 6 April, there will be a new personal savings allowance which will enable basic rate tax payers to earn the first £1000 of interest tax-free on investments such as cash, bonds, bond funds and peer-to-peer loans.

Higher-rate taxpayers will be able to earn £500 in interest before paying income tax on this, but there is not a personal savings allowance for additional-rate (45 per cent) taxpayers who earn £150,000 a year or more.

So it might be better to put higher-yielding bond funds into your Isa and then cash, if you have any allowance left.

"If you can't squeeze all your assets into an Isa, take into account your other allowances when deciding what does go in," advises Mr Cox.

Meanwhile, equity income investments will benefit from the new dividend tax regime which also comes in on 6 April and will enable all investors to earn dividend income of £5000 before paying any tax. Dividend income above this will be taxed at 7.5 per cent for basic-rate taxpayers, 32.5 per cent for higher-rate taxpayers and 38.1 per cent for additional-rate taxpayers, but this is still lower than income tax of 40 and 45 per cent for higher and additional-rate taxpayers, so investments such as bonds that incur income tax should take priority in your Isa.

Growth-focused investments which do not pay dividends, for example, certain equities and equity funds, could be held outside an Isa if you have used up your allowance. When you sell these they will incur CGT, but every investor has an annual CGT allowance of £11,100. Even if you have used this, CGT is lower than income tax at 18 per cent for basic-rate taxpayers, and 28 per cent for higher and additional-taxpayers.

Safety and convenience

After making use of your premium bond and Isa allowance, you should look around for the best possible rate you can get on a cash account, some of which may be tax-free due to the personal savings allowance.

Usually it makes sense to split large sums between different banking groups, as the Financial Services Compensation Scheme (FSCS) only covers £75,000 cash per person per firm. However, the FSCS will protect up to £1m for temporary high balances of up to six months in the event of the failure of a bank, building society or credit union.

One of the safest options for cash is N&SI products: these do not pay the best rates, but because N&SI is an executive agency of the Chancellor of the Exchequer everything invested with the organisation is effectively lent to the government. For you not to get back your money, the UK government would have to default - something considered to be very unlikely. Up to £2m can be deposited into the NS&I Direct Saver account, which has an interest rate of 1.1 per cent annual equivalent rate (AER), payable in April each year.

There is also an argument for convenience: if you already have an account with one provider and open another with them then you should be able to move your money around the accounts more easily than between different providers.

Shop around

But for a better rate you should shop around different providers - something you should also do when choosing who to open a cash Isa with. A good starting point is comparison websites, but these don't necessarily cover all of the market or offer the best rates. Many comparison websites are advertiser-driven, so list the products and services of institutions that pay to advertise with them - instead of the best offers on the market.

So use a few comparison websites to see a wider range of offers, and compare quotes from companies directly as some product providers choose not to be featured on price comparison sites.

Some comparison websites automatically pre-select some options in their online forms, so watch for unwanted extras you don't need. Also check all the questions on the form to make sure there are not any pre-selected answers.

Ms Peters suggests that one of the sites you should use is moneyfacts.co.uk because it does not get paid to show any of the products on its site, unless in an advert, or to include a product in its 'Best Buys'.

Moneyfacts.co.uk's top 10 easy access accounts with no bonus are as follows:

Source: moneyfacts.co.uk, as at 22 February 2016

* AER

** Only allows three withdrawals per calendar year. 0.50% paid for the remainder of the calendar year if more than three withdrawals made.

Meanwhile, Ms Peters suggests Santander 123, which pays 3 per cent AER on balances between £3,000 and £20,000. You need to put in a minimum of £500 a month to earn the interest. However, you are not obliged to keep your monthly £500 payment into the account once it has gone in. This account does not pay interest on monies above £20,000.

Santander 123 also charges a monthly fee of £5, although with this account you can get cash back on selected household bills.