Halifax Web Saver : non tax-payer

newsmonkey

I've had a mini-cash ISA with the Halifax for some time, and it's getting me 4,15% AER (variable) tax-free.

However, I've just opened up one of their Web Saver accounts, which currently pays 4,90% gross.

I'm not a taxpayer (yet), so can apply to be paid gross interest. This makes this account much better than the ISA (no paying in limit if I'm right?)

But here's my two questions:

If the BOE base ratechanges, would the rates of both my ISA and web-saver remain in proportion to each other? ie: will the web saver always pay better (gross)?

If I send my R85 to Halifax applying for gross interest, does this request come into effect once they receive it, or from the moment the account was set up?

isasmurf

Firstly, lets answer your two questions.

When the BoE baserate changes it depends on Halifax's business decisions as to whether the difference in interest rates between the ISA and the websaver remain the same. For example, they may decide on an aggressive ISA strategy and increase the ISA interest rate quite substanially.

When you fill in the R85 it applies for the current tax year. I don't believe Halifax is under any obligation to repay you any tax paid on interest received in the account you have filled in the form for, but they probably will. If they don't then you can claim it back from the taxman.

On to the other point I wanted to make. It looks like you're doing what a lot of people do and look at the short term. This is not always the best strategy. Think what are you saving for? Will you need the money in the next year or 2 years? If yes, then you'll probably be right to look at what gives higher interest rates now. But if you intend your savings to be for a longer term, start thinking when will I become a taxpayer? Although the Websaver pays more now, you could accumlate a large amount of money in a ISA which would earn you a higher interest rate when you do eventually start paying tax.

MJSW

I agree with Saver Smurf's comments, you need to consider the longer term implications as well.

Luckily, you can have your cake and eat it. Why not just transfer the ISA to a provider paying a better rate? That way you get to keep the money in a tax free account and get a higher rate.

For example, Abbey Postal ISA pays 5.35% and Yorkshire Building Society E-Isa pays 5.2%. If you want to stay with the Halifax, their ISA Saver Direct (which is operated by phone) pays 5.15%.

cloud_dog

News, sent off the R85 to ING for Mrs Cloud_dog and the gross interest only started once they received / actioned the form - even though in my letter I requested that this start from the beginning of th 04 tax year.  Only missed out on one months net interest so not too bad.

cloud_dog