£5000 and a savings account..?

stamina9008

Hi, from september last year i've saved £5000, its in a really basic Everyday Saver account with Barclays.
I know nothing about ISA's, and in the short time ive looked into it, it hasnt been much clearer. I get that interest gets earned on the money each year, and then compound interest occurs but..
Can someone explain it to me in a super simple way?
I suspect a cash ISA is best, right?
Maybe someone could (based on interest rates) tell me how much would accumulate on this 5k after a year?
Maybe theres something else i can do with this 5k?
I either want to invest or save it, not sure. But i just wanna put it away and forget about it, and hopefully it'll grow.
Cheers.

xylophone

If you are a tax payer, you might as well use your ISA allowance because you will not pay tax on the interest.

Let's suppose a non-isa account pays 2% per annum and an isa account pays 2% per annum and that you are a standard rate tax payer. You pay £5000 into each account.

At the end of the year you receive £80 in interest on the non-isa account because tax has been deducted at 20%.

On the ISA account you receive £100 in interest because the isa interest is tax free.

If you have £5000 you might consider opening an ISA with the Cheshire which pays 2.5% at the moment.http://www.thecheshire.co.uk/ISAs/ISA-saver/

Remember that this is an account with a bonus so be ready to move when the bonus ends or even before if you can find a better rate.

Remember that if you want to transfer your isa to another provider you must ask the new provider to arrange the transfer - if you do it yourself you lose the ISA status.

http://www.moneysavingexpert.com/savings/best-cash-isa