Should I be saving in an ISA?

IMF2000

If I withdraw at different points between now and october - how will this affect the interest due?


Just wondering if it will be a waste of time using an ISA as the balance will likely be £1 in October and I believe they pay out the interest the following April?

Cheers.

lisyloo

ow will this affect the interest due?

They will calculate interest on the days the money is there.
So if (for example) you had the money in for 6 months you'd get half of 3% which is 1.5%.
If you had it in for 157 days you'll get 157/365ths.
The advantage is you'll pay no income tax on that interest.

Just wondering if it will be a waste of time

ISAs are great long term.
The amount of tax you'll save on 3% interest on the whole £5K for 9 months is £22.50 so not huge.
If you take time to save the £5 then it's obviously be less as I've calculated £5K for the entire 9 months, so it's not hugely worthwhile.

ISAs work really well when you save over many years and keep the money in long term e.g. if you have a 6 figure sum then obviously the tax savings are much greater.

IMF2000

I thought that may be the case.
Many thanks.

masonic

As an existing customer, the Halifax ISA should be minimum hassle to open and you'll get just about the best rate available at the moment. No savings account will pay 3% after tax. The other option open to you is a Lloyds Classic + Vantage current account, which will pay 4%, but only on balances of £5000-£7000 - so it won't work very well if you are gradually building up your savings.

IMF2000

I've decided to open an ISA, seems the most sensible option.