Mini Isa

smevans

If I were to invest in one now bearing in mind the tax year ends next month - when would I receive the benefits of doing this ?

I will only have this money to invest for a couple of months as buying a property but am thinking I might be able to make a few quid beforehand ?

ariba10

You can only invest £3000 a year in a mini cash ISA.
What you would save on that is the tax you would have paid on the interest earned.

codetown

Cash ISAs are tax-free instruments, but work very much like other savings.
The majority of institutions will 'track' interest daily and pay it yearly (usually at the end of the financial year, i.e. at the beginning of April).

Of course you can invest in a Cash ISA only up to 3k each year plus anything you are rolling on from the past, plus related interest.

The benefits are of course immediate.
If you move 3000 pounds today out of a 5% interest account and put them in an ISA account at the same 5% rate you will gain from day one a tax differential on the interest corresponding to your tax rate (i.e. 22% or 40%).

An example:
For your 3000 pounds saved in a normal 5% saving account you will get 12.5 pounds gross a month, minus 20% tax at source from the bank -> 10 pounds net a month (plus you might have to pay some more tax later if you are tax payer at 40%).
From an ISA at the same 5% rate you will get 12.5 pounds net a month (no tax to pay at all).

smevans

codetown wrote:

An example:
For your 3000 pounds saved in a normal 5% saving account you will get 12.5 pounds gross a month, minus 20% tax at source from the bank -> 10 pounds net a month (plus you might have to pay some more tax later if you are tax payer at 40%).
From an ISA at the same 5% rate you will get 12.5 pounds net a month (no tax to pay at all).

Thats summed it up very clearly for me - Thanks ! :beer:

zag2me

When I was saving for a house deposit, I used my ISA first then a regular saver on top of that. When it came to actually buying a house, I had quiet alot of money and my isa was making a nice sum each month and ever increasing. I decided to keep all my isa money and just use the small deposit 5% to buy my house. It was one of the best decissions I have ever made as I now have a large isa making money each month, that also gives me a cushion if I ever loose my job or whatever.

Moral of the story is, use your ISA allowance for the current tax year, as you wont ever get it again.

smevans

Ok looking at the Mini Isa providors I think i'll either go with Alliance & Leicester or Halifax.

Now, bearing in mind I have a mortgage application being administered right now will this effect my credit scoring or have any adverse effect on the application should I take out a Mini Isa right now ?

HGLTsuperstar

No, as the mortgage is based on your credit rating, i.e. what you're allowed to borrow, your ISA is you saving your own money so totally differerent

smevans

Ok well I have actually gone for the Bradford & Bingley one which pays out interest on a monthly basis which suits me as the ISA will not be a long term investment for me.

Would I be able to open a second mini isa with a different providor ?

jem16

If you have opened a Mini CASH ISA, i.e. put in £3000 cash, then you can't open another CASH ISA until the new tax year on 6th April. You could however invest a further £4000 in a Mini STOCKS & SHARES ISA.