Should I move my money into an ISA now, or do something else with it

harrpau7

I am saving a minimum of £300 a month (can practically double if I do a bit of overtime and have a quiet social life each month). I currently have £2,000 in my ISA from the last tax year and £8,000 in my normal savings account (thank you PPI).

The savings are for two things, a deposit on a house in about two years and a car (looking to spend about £5,000 on a decent second hand car about 3 years old) within the next year. I currently am keeping the £8,000 in a normal savings account and then was going to transfer £5,500 to the ISA at the end of March next year to get the best interest. By then I am hoping to have at least £11,000 in my normal savings account along with the 2K in my ISA, (before I make the transfer to my ISA to get ISA interest rate on £7,500).

Should I just stay as I am, transfer to my ISA or is there even something better I can do with this money.

Thanks

Eponym

If you don't need the money now, it would surely make sense to fill your ISA now. You'll still have plenty left over in your normal savings account. (Presuming of course that the savings account pays less after tax than the ISA).

Frogletina

If you can get more interest in your current Isa, put it in there. You can always transfer it to another Isa if you find one with a better rate. I'm assuming the one you have is instant access.

If you don't need it for at least a year you could always open up a fixed rate Isa.

harrpau7

This is the state of play for me atm....

ISA Saver Online £2,000 balance atm - 2.75% tax free/AER variable including 12 month fixed bonus of 2.50%, opened in March 2012
http://www.halifax.co.uk/savings/accounts/cash-isas/isa-saver-online/

Online Saver £8,000 balance atm - 2.80% gross/AER variable including 12 month fixed bonus of 2.70%, opened in March 2012
http://www.halifax.co.uk/savings/accounts/online-saver/

Everyday Saver £100ish balance atm - 2.00% gross/AER variable including 12 month fixed bonus of 1.50% (saving leftover money in there for a rainy day – not counting towards my actual savings, opened June 2012),
http://www.halifax.co.uk/savings/accounts/everyday-saver/

I was going to transfer £5,500 from my Online Saver to my ISA Saver Online in March next year, but then I found out I wouldn't get the ISA interest rate for the whole balance if I transferred it in March, plus unless I am reading this wrong the Online Saver has a better interest rate anyway. Just want to know what is best to do as I could be close to 15K with a bit of overtime and less wasting money.

Thanks again

bigadaj

You should get the ISA interest pro rata, also the ISA is tax free so knock 20% off the rate of the savings account to compare like for like.

harrpau7

bigadaj wrote: »

You should get the ISA interest pro rata, also the ISA is tax free so knock 20% off the rate of the savings account to compare like for like.

So if I want the full interest for my ISA I need to put the money in now, and not the day before the tax year ends?

p00hsticks

harrpau7 wrote: »

So if I want the full interest for my ISA I need to put the money in now, and not the day before the tax year ends?

Yes - the longer you leave your money in the more interest you'll get. (As bigadaj says, interest will be calculated pro rata depending on how long it has been in the account - If you have your money in for the whole year you'll get 2.75%, if you have it in for a day you'll get roughly 1/365th of 2.75%, and somewher in between will earn you somewhere in between.

And as the 2.75% on the ISA is tax free, then assuming you are a basic rate tax payer, it pays better than the Online saver, which deducts 20% tax from your 2.8% , leaving you with 2.24%

xylophone

http://www.moneysupermarket.com/savings/savings-calculator/
Try the calculator.

Make sure you are getting the best rate for your money http://www.moneysupermarket.com/savings/

If you want to transfer an ISA to get a better rate, see how to do it here http://www.moneysavingexpert.com/savings/cash-isa-transfers

psychic_teabag

One possible reason for delaying moving the money to an ISA now is the car : if you were to put in £5000, then found you had to withdraw some to pay for the car, you couldn't replace it even if you had the money later. Maybe move £2k or so to the ISA now, and then more later when you know more about where you stand.

Could look into a regular-saver account for your monthly savings : can get up to 8%. See https://forums.moneysavingexpert.com/discussion/608697

You should be able to do a bit better than the rates you are getting. Eg from a quick look at the tables, Cheshire are paying 3.35% for ISA, and Coventry have an instnat-access account offering 3.25% (but only accepts deposits until October or something).