Which savings should I transfer into my cash ISA?
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pinklady21
Posts: 870 Forumite
This might be a silly question, but I am tying myself in knots trying to work out the correct answer. Can anyone help me with my 'rithmitik please?
I am a higher rate tax payer. I have savings in various savings accounts earning different rates of interest. I wish to transfer £20,000 to a cash ISA this tax year. I have not yet paid anything into a cash ISA this tax year. The point of doing this is to save tax on the savings interest.
The ISA rate for this year's ISA is 1% but I have just opened a Nationwide Loyalty saver at 1.4%, so will transfer in there once the account is open.
Which taxable savings account(s) should I target to make the most of the tax free interest?
It could be a combination of any of the 3 accounts.
Here are the balances and rates:
Yorkshire 1.75% £22,000
Santander 123 1.5% £20,000
(linked to a 5% regular saver, so need to keep a min balance in there I think)
Birmingham Midshires 1.44% includes bonus rate until Nov 2018
£12,000
I already have my full allowance in Premium Bonds.
Thanks in advance!
I am a higher rate tax payer. I have savings in various savings accounts earning different rates of interest. I wish to transfer £20,000 to a cash ISA this tax year. I have not yet paid anything into a cash ISA this tax year. The point of doing this is to save tax on the savings interest.
The ISA rate for this year's ISA is 1% but I have just opened a Nationwide Loyalty saver at 1.4%, so will transfer in there once the account is open.
Which taxable savings account(s) should I target to make the most of the tax free interest?
It could be a combination of any of the 3 accounts.
Here are the balances and rates:
Yorkshire 1.75% £22,000
Santander 123 1.5% £20,000
(linked to a 5% regular saver, so need to keep a min balance in there I think)
Birmingham Midshires 1.44% includes bonus rate until Nov 2018
£12,000
I already have my full allowance in Premium Bonds.
Thanks in advance!
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Comments
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pinklady21 wrote: »Here are the balances and rates:
(linked to a 5% regular saver, so need to keep a min balance in there I think)
Thanks in advance!
If there is a minimum, you need to know what it is or how can you plan effectively, so worth checking before you tie any more knots in your brain!0 -
Personally I would say you are holding too much in cash, but assuming you have good reason for that I would downgrade the Santander 123 to a 123 Lite and then move that £20K into the ISA.0
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Is the santander account your main bank account? clearly taking all of the money out will mean you then need to use the overdraft, which isn't wise. I would take out a certain amount from the lowest rate (santander), of say £15k, could be £18k. Leaves you some day-to-day money.
The rest comes from the next lowest paying account up to £20k.
Then downgrade the santander to the lite account to remove the £5/month fee.0 -
If you have £50,000 in premium bonds then use this. You only get extra money if you win. The rate is 1.40% but that is spread over all bond holders. Some get a prize most get nothing. Admittedly if you win it is tax free.
see:
https://www.moneysavingexpert.com/savings/premium-bonds0 -
It's a massive generalisation to say that most get nothing, as this depends entirely on the size of the holding and how long it's held for! For holders of that maximum £50K you refer to, there's an 87% probability of winning at least £25 in any given month, according to https://www.moneysavingexpert.com/savings/premium-bonds-calculator/Matthew2018 wrote: »If you have £50,000 in premium bonds then use this. You only get extra money if you win. The rate is 1.40% but that is spread over all bond holders. Some get a prize most get nothing. Admittedly if you win it is tax free.
see:
https://www.moneysavingexpert.com/savings/premium-bonds0 -
It's a massive generalisation to say that most get nothing, as this depends entirely on the size of the holding and how long it's held for! For holders of that maximum £50K you refer to, there's an 87% probability of winning at least £25 in any given month, according to https://www.moneysavingexpert.com/savings/premium-bonds-calculator/
I stand corrected. Using the calculator showed that a £50,000 holding will give a person with average luck a £500 return a year which is 1% - the same as the rate for the ISA mentioned.
With apologies to Clint Eastwood (Dirty Harry) "you've gotta ask yourself one question: "Do I feel lucky?"0 -
While the headline of that page does indeed say that, it's actually quite deceptive - the page showing the full odds illustrates that with a £50K holding over a year, 87% should win at least £500 and 24.7% should win at least £750, from which they conclude that average luck should deliver £500, but only because they don't show the probabilities of winning at least £525, £550, etc!Matthew2018 wrote: »I stand corrected. Using the calculator showed that a £50,000 holding will give a person with average luck a £500 return a year which is 1% - the same as the rate for the ISA mentioned.
The median (50% probability) will clearly be somewhere in between those rounded £500 and £750 points, probably round about the £600 mark (i.e. a 1.2% return), but fundamentally it is all about luck so as ever none of these figures are guaranteed....0 -
pinklady21 wrote: »This might be a silly question, but I am tying myself in knots trying to work out the correct answer. Can anyone help me with my 'rithmitik please?
I am a higher rate tax payer. I have savings in various savings accounts earning different rates of interest. I wish to transfer £20,000 to a cash ISA this tax year. I have not yet paid anything into a cash ISA this tax year. The point of doing this is to save tax on the savings interest.
The ISA rate for this year's ISA is 1% but I have just opened a Nationwide Loyalty saver at 1.4%, so will transfer in there once the account is open.
Which taxable savings account(s) should I target to make the most of the tax free interest?
It could be a combination of any of the 3 accounts.
Here are the balances and rates:
Yorkshire 1.75% £22,000
Santander 123 1.5% £20,000
(linked to a 5% regular saver, so need to keep a min balance in there I think)
Birmingham Midshires 1.44% includes bonus rate until Nov 2018
£12,000
I already have my full allowance in Premium Bonds.
Thanks in advance!
From the other posts above it looks like your Premium bonds have the lowest (notional) interest rate. I would take the money from there.....It still leaves £30,000 in to win a big prize.
Ah, sorry! just re-read OP.......Taxable accounts only! Ignore post.No longer trainee
Retired in 2012 (54)
State pension due 2024 (66)
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Thanks all for taking the time to reply - much appreciated.
A couple of points:
Why so much cash?
- the cash is for a deposit on a house, which we expect to need over the next year or so. So needs to remain liquid.
Why max out the Premium Bonds with 50k?
I have reasonable luck with my premium bonds, at least £750 per year. Some months only 1 prize, but very rarely there is no prize at all, and often more than one number comes up. All tax free, and of course with the added frisson of possibly winning big!
Santander Account regular savings conditions
https://www.santander.co.uk/info/savings/regular-esaver
- it seems that you only have to have a Santander 123 or 123 Lite account when you open the regular saver. Reg saver needs to be funded via a Santander Current account standing order. But I also have an "ordinary" current a/c with Santander already, so presumably I could fund the Reg Saver with that instead?
Alternatively, if it transpires that I have to keep the 123 account the whole time I have the Reg saver to get the 5% interest, then I like the idea of changing it to a 123 Lite instead - £12/year fees as opposed to the £60 for the 123.
But will lose out on the 1.5% interest. However, could use the BM saver for any balance remaining to earn 1.44% until the end of the year.
I still need to double check with Santander about the implications of either downgrading to a 123 Lite, or simply funding the reg saver from my other non 123 current account.
However it looks like "on balance" the best thing to do is to transfer the £20k Santander balance to my ISA.
Thank you all!0 -
(my bold)pinklady21 wrote: »- the cash is for a deposit on a house, which we expect to need over the next year or so.
Are these accounts in your name only, or in joint names?
Does the other half of the "we" who is buying with you have similar levels of cash savings?0
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