Barclays regular saver vs ISA

Jondur

Hi,

I'm sorry if this has been discussed before ( I have looked, I promise!) but in this forthcoming tax year I will have approx £300 per month to save. I have applied for an ISA and also the Barclay's 10% regular saver. Am I best putting £250 per month (the maximum) in the regular saver and £50 in the ISA (which is 5%) or vice versa?

Thanks in advance

Jon

Careful_ly

Hi Jon

As the Barclays account is a fixed 10% interest rate and ISA's are about 5% the best way is to put £250 in the Barclays account and the £50 into the Isa. Then when the Barclays account matures (12months from opening) which is just before the end of 06/07 tax year, use the proceeds to top up the ISA to £3000.

This earns you maximum interest even if you are a 40% tax payer.

HTH Careful_ly

Jondur

That's great - thanks.

grumbler

Hurry up with the Regular Saver! Otherwise you will not have enough time before 5/4/2007 to move money to ISA when it matures in 12 months and will lose your next year ISA allowance.

moneysavingobsessive

Or you could open another regular saver with the remaining £50 (e.g Halifax regular @ 7%, which if you are a lower rate tax payer is 5.6% net), earning a little more interest than the highest ISAs such as A&L 5.2%. If you are a higher rate tax payer, then just go for the ISA...

Am I dillusional, or did higher rate taxpayers once just pay 20% on their savings interest?!

Careful_ly

The bank or building society only take 20%, but you then have to declare to the tax man and pay the extra, either through a change in code or a payment by 31st January for the tax year ending 5th April the year before
So anyone getting interest that should have tax at 40% in year ending 5.4.06 needs to pay by 31.01.07 on self assestment forms, or their code will be changed to collect in tax year 07/08
Dividends (from shares) also need to be declared, they have only had 10% deducted