Transfer to ISA worthwhile?

emmawilliamso1

Hi there,

I'm looking for some advice on ISAs please....my boyfriend has £6,500 sitting in a normal Halifax Savings Account and I wondered if it would be worth his while to shift this money to an ISA before the end of the tax year, obviously staying within the limits you are allowed for an ISA? The money wont be in the account for long, whether he shifts it to an ISA or leaves it where it is, as he is using it as a deposit for a house soon but i'm just not sure if he is worse off not having the money in an ISA.

Can anyone help?

Many thanks

lisyloo

He will probably be worse off because the Halifax will be automatically deducting 20% of his interest in income tax.
However whether it's worth it depends on the timescale.
If we work on 6 monthts and interest of 3% and assume he pays 20% tax then the difference is £20, so to be honest it's not a huge amount because interest rates are so low right now.

Long term the benefits of ISA are still there because some people have 6 figure sums.
However for small amounts and short term, there isn't a huge benefit.

Mickygg

I agree with lisyloo - you need to think of ISA's as a long term savings account, as the real benefit only really kicks in when larger balances have built up. You will see people on here complaining the rates are too low and whether an ISA is worth it - which I agree rates are a bit low when you compare them to fixed rate bonds, but once built up the gains will be better.

If you are thinking of transferring to another provider - rememebr you will lose out on some interest in the cross over period.

emmawilliamso1

Hi there - thank you both for your help.

I suspect he will just leave the money where it is then but I will let him know that for long terms savings an ISA is best.

Thanks again

Emma