What happens when my fixed rate ISA comes to an end?

davidbrown91

Hi all,


Schedule:


Apr '14 - Balance = £5760 (fulfilled my tax free allowance)
Apr '14 - new tax year begins


Aug '14 - Balance = £11520 (fulfilled tax free allowance for FY15)
Aug '14 - Gross Interest of 1.85% p.a. paid.


Oct '14 - End of 12 month fixed rate ISA at 1.85%, rate will drop to negligible.


Any advice on what I should do? How does the interest rate work for the next period from Aug '14 to Aug '15 when two interest rates will be applicable?

Also how much in interest will I be expecting to earn?


Thanks for any help. All advice is appreciated.

FLAPJACK

Well unfortunately ISA's are exposed to the current low rates too, -I am in the same situation as you....a 5% deal coming to and end-.

The only thing we can do is transfer the balance in the ISA to another ISA ( therefore protecting the taxfree element)....and when tranferring see if you can get into a variable ISA...if you fix now you could be left getting paid a low interest when the rates have gone up, more so if you fix for longer than a year.

Don't be too disspondent at the low rate you will be getting...as long as you don't fix you can transfer should/when the rates rise.

Just make sure to transfer into an ISA....even if you see a non ISA account paying more interest....you need to protect the 11.5k from the taxman.....I'm sure you know that if you drew any of it you can't pay it back in....and if you draw it all out you will have to start all over again from next years allowance.

As the saying goes "Keep Calm".

Freecall

The real advantage of ISA's lie not in the immediate return but the fact that all the return it ever earns will be tax free for the rest of your life.



Well, if the politicians keep their hands off them that is!

davidbrown91

Thank you for your inputs.

So how much in interest can I expect to earn from £11,520 with a gross interest p.a. of 1.85%?

littlemissbossy

£213.00 pa

FLAPJACK

£213.12p for a year.

lisyloo

How does the interest rate work for the next period from Aug '14 to Aug '15 when two interest rates will be applicable?

You'll get the higher rate for the 2-3 months between August and October, then the lower rate will be applied for the remaining 9 or 10 months.
They can calcualte it on a daily basis e.g.
11520 * 0.0185 * 90/365 days
plus
11520 * 0.001 * 275/365 days

If you had 1.85% for 365 days then it would be
11520 * 0.0175 = £213.12

davidbrown91

Thanks for the responses!

kidmugsy

Be careful that your provider doesn't rely on your inertia to lock you into another fixed rate at an unattractive rate.

brewerdave

kidmugsy wrote: »

Be careful that your provider doesn't rely on your inertia to lock you into another fixed rate at an unattractive rate.

...interestingly I had a fixed ISA "mature" recently and the existing provider has actually offered me a follow up rate better than I can find anywhere else.
2.1% for 12 months:T (bit sad that I'm applauding 2.1% tho'!!:()

veryintrigued

brewerdave wrote: »

...interestingly I had a fixed ISA "mature" recently and the existing provider has actually offered me a follow up rate better than I can find anywhere else.
2.1% for 12 months:T (bit sad that I'm applauding 2.1% tho'!!:()

And the provider is??
(Please!)