Should I open an ISA???

simonjm

I have recently been considering opening an ISA and transferring the maximum amount to it from my savings account. However, as I am a postgraduate student and registered not to pay tax on my interest from my savings account, I believe in this situation I am better off to keep it all in the savings account. My gross interest in the savings account is around 6.3% (which if I did get taxed at 20% would reduce to 5.04% net), while the ISA is around 6.1%. Hence for most people who have to pay tax, opening an ISA at these rates is advisable, but in my situation not so. I don't have much of a banking mind, so perhaps somebody in the know-how can verify that I am indeed correct stating the above. Thanks.

Baldur

It depends whether you are looking short-term or for the future, when you will (hopefully) be a tax payer - deposits & any interest in Cash ISAs retain their tax-free status over subsequent years, so can build up to a significant pot of tax free savings over the years - anyone who has contributed the maximum amount to Cash ISAs since they began (and their predecessors, TESSAs) could have in excess of £50.000 tax-free at the moment.

mhifoe

You are correct.

However, you should consider the fact that in the future you are likely to get a job and pay tax. At this point, you will need to start paying tax on any savings that are not in an ISA. If you have large savings you may need to start putting the into an ISA soon so that they are all exempt from tax by the time you start working.