My situation, shall choose isa before april 6

dean_ham

As some of you know I am in a situation where I am saving for my own home in roughly 2 to 3 years time.

In total i have access to £13,669. £10,669 which is invested in a company and has made £669 in nearly 2 years and also £3000 which is in an egg internet savings account at 5.5%.

Shall i transfer the £10669 to my current account and apply for the new AL 5.4% Cash ISA online depositing £3000 before april 5 and transfering the £7669 to my egg account.


Another question about isas that i cant get the answer to when reading up about them is are they a savings account for the long run? i.e if in 5 years time my isa account is worth £9k if i withdraw any of that money i will not be able to save back upto £9k only the set amount of £ each tax year?

Also how do you make sure that you dont go over the £3k a year? Do you have to keep track or do the inland revenue have the figures saying how much you can save this year?

The reason i am thinking of juggling my money around is that i want to make the most money out of my savings for my home, and the company that i have invested £10k+ in is a risky investment and i would rather that my investments are guaranteed x% of interest a year (which is why i am thinking about using an isa before the 5th april approches)

Thanks for your help guys and gals!

Dean

Reaper

Since you are not happy with the performance of the shares and you say they are risky, and you are saving for a specific target then yes, it might make sense to sell them.

If so putting £3000 in a cash ISA this year and next is a good idea. Note the A&L has a £25 transfee fee, but no fee for withdrawals. This means it will be hard to switch to another provider if they slash their rates in the future. You might like to look at the YBS instead who pay 5.2% with no nasty catches.

if in 5 years time my isa account is worth £9k if i withdraw any of that money i will not be able to save back upto £9k only the set amount of £ each tax year?

That's right. You can withdraw any amount you like but you can only add £3000 per year.

You have to keep track how much money you have invested each year (although your provider will probably point out if you try to add too much). If you find yourself in breach of the rules the IR would tax you when they discovered it (or worse if they thought you did it deliberately).

lipidicman

Reaper has just saved me the effort of replying (ah, I've just seen my mistake!)

I want to second the point about that sneaky £25 transfer fee which will snare you - do the calculations on how much the rate would have to drop to make a transfer worthwhile - then opt for an ISA with a slightly lower rate but no trap!

Fatboy_NSS

It's up to your ISA provider to make sure you don't go over the limits, so if you try to make a deposit which takes you over the limits then they willl return it to you. It is obviously up to you to play by the rules and only open 1 ISA a year, and if you get caught breaking this rule then there will be a penalty from the Revenue.

Abbey pay 5.35% on a Postal ISA which doesn't have a fee for transferring in or out. Whichever ISA you go for I wouldn't leave it until April, as branches and processing centres will be at their busiest and if the company doesn't get the account open in time then you miss out.

Finally I get your point about holding shares in 1 company being risky (especially when it makes up the bulk of your savings), but it might be worth sticking the rest of your money in a low risk managed fund inside an ISA wrapper rather than in an online saver paying around 4% after tax.