Cash isa or offset savings pot?

crockpot

Sorry to sound a bit thick! It`s been along day!

I have a 5 year fixed rate offsett,which is new,not sure of the rate (will have to go and have a look later) but say 5%.

Found out i maybe coming into some money about £10k, am i best putting it into offset linked savings account or putting it into a cash isa? split between me and DH,to max it? Seen 1 at 6.3 %.

I do not want to make a capital repayment as you never know what is around the corner,would like to be able to access the money if I need to.

Thanks

MrMicawber_2

If you need acess to the money then an instant access ISA would be the route you need to go and your rate is therefore dependent on rate changes.

Putting the money into the offset is an effective rate of 5% * 100/80 if you are a basic rate tax payer or 5% * 100/60 if you are a higher rate tax payer - so pretty good.

However 'everyone' says you should make use of your ISA allowance if you can because if you keep it it is tax free income for ever, but if you don't your allowance it's lost for ever.

You could put £3,600 * 2 into ISA's and £2,800 against the offset. That might allow you some flexibility to get the better ISA deals as you have a bit of a rainy day cushion (£2,800) in the offset.