If you want to use rain water in the house it is worth investing in a purpose built system in order to avoid problems associated with stagnant water which is likely to occur in anything you build yourself. Having stagnant untreated water in pipes around the house would be a serious health hazard. For example, a system from freeflush is designed so that mains water flushes the system when there is no supply of rain water.
There are two kinds of systems to consider for domestic use: wall mounted systems (as above) which will typically hold water for a day or two of modest consumption, or buried tanks which could, in principle, hold water for a season. Installation of these larger tanks typically involves some filtration system and will require maintenance (e.g. from Graf).
To use the water in the garden, simply raise the tank on some blocks and use a watering can. For keen gardeners it is a valuable resource, to be used sparingly and kept for plants which are intolerant to the chemicals in the mains supply.
A final option is to dispense with the barrel and let the water run into the ground: but NOT simply at the base of the pipe by the wall of your house. Create a soakaway in your garden and install a pipe from the down pipe to take water into it. If you put the soakaway close to the house you need to be careful to ensure that it can cope with the amount of water coming in and follow building regulations in detail, but if you can place it well away from the house and don't mind an area of the garden being swampy in wet weather it could be a bit simpler.