Instant Access vs ISA

LB23_2

I have money in a mini cash ISA. I also keep money in an instant access savings account because I'm self employed and need to keep money aside ready for VAT and income tax.

I'm about to open an Egg account for my 'tax money' and I'm wondering with an interest rate of 5.5% whether I should take the money out of my ISA and put it in the same place.

I know that the ISA earns a lower rate of interest. But, of course, not subject to tax.

Because of the way the ISA works (are they all like this?) I cannot pay any more in this tax year. Even if I take some out, I can't then pay it back in.

Any advice please?? How can I work out the best place for the money that I hope (but can't guarantee) not to spend!

johnllew

Because of the way the ISA works (are they all like this?) I cannot pay any more in this tax year. Even if I take some out, I can't then pay it back in.

The maximum you can invest in a Mini-Cash ISA is £3000 this tax year. If you've invested the max and take some out, you can't replace it - all Mini-Cash ISAs work this way.

I would be wary of taking money out of your ISA; it's always worth leaving it and building up a tax-exempt fund because you don't know at what rate you'll be liable in the future. Next year's allowance is £3000 but in the following year, the limit is being reduced to £1000.

If you pay tax at 20%, then the net rate at Egg is 4.4%. Is your ISA earning more than that? If not, you may want to transfer it to an ISA with a better rate. A list of the best rates can be seen at Money£acts.

You can get £5 cashback if you open an Egg account savings a/c through Rpoints - click on the link below for details.

Fatboy_NSS

Switch to the Abbey postal ISA. It pays 5.35%, so that would be more than the egg 5.5% after tax.

I'm pretty sure that's the best mini cash ISA rate around, but I'm sure I'll be corrected if I'm wrong!