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What would earn more interest...

Options
which would earn more interest?

£5000 in an isa at 2%

or

£5000 in a savings account at 3.5% but interest gets taxed...

someone able to work it out :) or is the tax free isa always the best option?

Comments

  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    3.5% after 20% tax is 2.8%.

    Are you lazy or just don't understand the maths?
  • oh its that simple is it... #noob
  • HappyMJ
    HappyMJ Posts: 21,115 Forumite
    10,000 Posts Combo Breaker
    In the long term a tax free ISA may be better as you can only put so much in each year. It also depends on your tax rate. 40%+ taxpayers would be better off putting the money in an ISA. If you are a basic rate taxpayer then the savings account at gross interest of 3.5% is better (net interest being 2.8%).
    :footie:
    :p Regular savers earn 6% interest (HSBC, First Direct, M&S) :p Loans cost 2.9% per year (Nationwide) = FREE money. :p
  • talexuser
    talexuser Posts: 3,528 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    5000 at 2% is 100/year

    5000 at 3.5% is 175/year gross, 140 for a 20% taxpayer, or 105 for a 40% taxpayer.
  • jimjames
    jimjames Posts: 18,650 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Lokolo wrote: »
    3.5% after 20% tax is 2.8%.

    Are you lazy or just don't understand the maths?

    Unless the OP pays higher rate tax!
    Remember the saying: if it looks too good to be true it almost certainly is.
  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    cookney wrote: »
    oh its that simple is it... #noob

    Yep it is :D learn something new everyday!
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