ISA and Emergency Fund Question

ian9999

Hi all

I have a question to ask regarding my current ISA and emergency fund

My Santander Direct ISA Issue 9 has just over £20K and this is bonus rate of 3.3% including a bonus which expires at the end of July-13 and I also I have now an emergency fund of £4K which is with ING Direct and they have reduced this down to 1.5%

So my question is should I move my emergency fund to a new ISA or my existing ISA or even to a savings account with better interest

If I was to move it to a new ISA, I take it I wouldn’t be able to switch my existing ISA to a new deal within the current tax year

Thank you for any replies I get

Ian

marathonic

ian9999 wrote: »

If I was to move it to a new ISA, I take it I wouldn’t be able to switch my existing ISA to a new deal within the current tax year

You would be able to transfer to a new deal any time, or multiple times.

The simplified rule is that you can only pay new money into one ISA in a year. You can transfer as many times as you like.

The more complex rule is that you are also allowed to pay money into a second ISA, provided that all the money in the ISA you first paid into is, first, transferred into it.

ian9999

Thank you Marathonic for the reply

I never knew you could open a new ISA and transfer an existing ISA to a new provider within the same tax year

Ian

RoxRoxBling

At the end of July you could phone Santander and upgrade your current isa. There highest paying isa is 2% (unless your a current account or credit card customer)

In addition to opening another isa with higher interest

But remember to use your isa tax free allwance. (Until you retire I think then you become a tax free person)

Me personally I'd put the money (emergency fund) where the highest interest is.

ian9999

Thank you RoxRoxBling

I will find the best rate for my emergency fund, which would normally be an ISA when you take into account their tax free status, but will check first

And then in July I will find the best rate ISA I can find to transfer to

One further question, if my new ISA has a better interest rate than any other ISA when the Santander interest rate reduces, so I combine them together. Can I next year transfer only part of my ISA to a new ISA or does it have to be all?

Ian

dtaylor84

ian9999 wrote: »

Thank you Marathonic for the reply

I never knew you could open a new ISA and transfer an existing ISA to a new provider within the same tax year

Basically the only restriction (from HMRC) is that all the money you've contributed in this tax year must always be together in one ISA (and within the applicable allowance). You can move it around as long as you move it all, and you can split "old" money up as you like.

However the banks may impose other conditions...

RoxRoxBling

ian9999 wrote: »

Thank you RoxRoxBling

One further question, if my new ISA has a better interest rate than any other ISA when the Santander interest rate reduces, so I combine them together. Can I next year transfer only part of my ISA to a new ISA or does it have to be all?

Ian

As said above.
You can transfer part of the money in your isa, as long as any money you put in in the current tax year stays together. (Suppose its easier for the tax man to keep count??:rotfl:)

ETA just a bit of extra info
Just look out for isa's that allow transfers in (not all do), in addition some may have a penalty for transferring out (not all though, and the Santander with rate of 3.3% is ok to transfer out)

RoxRoxBling

Have you thought about drip feeding your money in the ING emergency fund account, into a regular saver. Regular savings accounts do sometimes have higher interest rates than isa accounts. Just a thought?

ian9999

RoxRoxBling wrote: »

Have you thought about drip feeding your money in the ING emergency fund account, into a regular saver. Regular savings accounts do sometimes have higher interest rates than isa accounts. Just a thought?

Yes I have thanks for the response, I have just applied for a First Direct account, and next going to apply for their regular saver

Ian

green1960

You could also open a Flexdirect with Nationwide which pays 5% gross on £2,500 for a year, just have to pay £1,000 a month in to it.