Confused about 'best time of year to open a cash ISA - help!

aprilthedog

Hello,

I'm a 42 year old moron who has never saved, or if I've had a few hundred to spare I've kept it 'safe' in a current account (I know....)

I've managed to save a grand (which for me is a lot of money) and I've been reading about ISAs. I notice that at time of writing the 2 year fixed ISA is being pushed as a suitable looking option for someone like me and that the Post Office is offering 2.25%.

What's confusing me is this: I keep reading that "Traditionally the best time to open a cash ISA is the end of the tax year (April 5)" - what I don't understand is this:

Does this mean that you'd be opening a cash ISA for the CURRENT tax year or does it mean you're opening an ISA for the NEXT tax year? ie the banks are advertising for the next tax year?

I'd want to keep paying into the ISA so I need to know the difference.

I know rates aren't great but I would like to do something to get the ball rolling quickly - I can't afford to waste any more time or gamble.

What should I do? If you're kind enough to respond would you please keep it very simple as I'm hopeless with numbers.

Thank you!

Yorkie1

The tax year runs from 6 April every year. Traditionally, banks etc offer improved interest rates in the run up to the end of the tax year, to entice savers to deposit funds with them before the end of the tax year.

The adverts don't tend to relate to products exclusively for the following year, although of course some may remain available after the new tax year starts.

If you are a taxpayer and are likely to be able to use most of your cash ISA allowance each year, then personally I'd put money into an ISA before the end of this tax year so as to make the most of this year's allowance, and to give yourself the whole of next year's allowance.

If you want to make regular payments into an ISA, then check the T&Cs carefully - many fixed rate ISAs only allow one initial payment in. But of course if you did that this tax year, you can start paying into a different one regularly in the new tax year.

aprilthedog

Thank you!

CLAPTON

aprilthedog wrote: »

Hello,

I'm a 42 year old moron who has never saved, or if I've had a few hundred to spare I've kept it 'safe' in a current account (I know....)

I've managed to save a grand (which for me is a lot of money) and I've been reading about ISAs. I notice that at time of writing the 2 year fixed ISA is being pushed as a suitable looking option for someone like me and that the Post Office is offering 2.25%.

What's confusing me is this: I keep reading that "Traditionally the best time to open a cash ISA is the end of the tax year (April 5)" - what I don't understand is this:

Does this mean that you'd be opening a cash ISA for the CURRENT tax year or does it mean you're opening an ISA for the NEXT tax year? ie the banks are advertising for the next tax year?

I'd want to keep paying into the ISA so I need to know the difference.

I know rates aren't great but I would like to do something to get the ball rolling quickly - I can't afford to waste any more time or gamble.

What should I do? If you're kind enough to respond would you please keep it very simple as I'm hopeless with numbers.

Thank you!

the best time is today as you start earning interest immediately
delay in general means you are losing interest

if a better product become available later then you simply transfer (using the correct procedure) to the new product if it allows transfers in
in any event a new ISA can be open from 6th April

aprilthedog

Thanks to Yorkie and Clapton

I've looked at many of the cash ISAs currently available and I was surprised to learn that most of them seem to specify that no more deposits may be made after the initial lump sum - these are the 'fixed rate' ISAs (including the Post Office one I wrote about in my first post). I'm wondering what the point of having one is - if I've only got a grand to deposit anyway and I can't keep paying in.

Not sure what all the fuss is about ISAs now. Perhaps they're only really for those who have the full allowance (5600 grand or whatever it is) at hand which they want protected from the tax man.

The whole point (for me) was the appeal of putting regular money away.

innovate

Literally all fixed rate savings accounts - ISAs or not - only allow one deposit, or only deposits within a short window of time. The only exception I know of is the Lloyds 2-year ISA (and may be now the TSB one, too).

Obviously, fixing a cash ISA is not appropriate for many people, but then it also is, for many others. It doesn't seem right for your current requirements.

You are absolutely right though, there is a lot too much fuss about cash ISAs these days, at least for basic rate tax payers. Save up in a top-interest paying current account, or a top-interest paying regular savings account. You can still empty the lot into a cash ISA just before the tax year is out, to mAke the best of your annual ISA allowance.

You shouldn't forget that in the long run, having a lot of your money in a tax-free wrapper might turn out to be the difference between paying basic and higher rate tax. If you are, however, looking at saving up for something that you want to buy in the next 2-5 years, you may just forget about ISAs altogether at present. Keep an eye on what cash ISA rates do, though - eventually they might come out of the doldrums.

aprilthedog

Thank you Innovate.

Every time I think I've got a handle on this 'finance' thing I realise there are too many variables. Not that I don't appreciate everybody's input - I really do and I'm learning bits and bobs via everybody's posts, but I've realised that my own work situation is probably making this financial planning business much harder than it needs to be. I've just left a job (it made me ill) and have decided to do agency work from now on. How that'll affect taxation etc I've no idea.

I probably should've mentioned that at the start!

jimjames

For £1000 there is no point opening an ISA in my view. You can get 5% (and boost to 12.5% gross) by using Nationwide Flexdirect and Halifax reward accounts.

No cash ISA comes anywhere close to those numbers for small savings amounts.

aprilthedog

I've only just been able to navigate to my original post (I couldn't find the 'posts you made' link - told you I was a moron..)

But thanks for your advice and I think you're right. I've looked at 'Which?'s guide too, and they've highlighted a regular savings account by HSBC offering 6% interest. You have to bank with them - I don't and I'm not sure whether they'll let me in just to take advantage of this savings rate - and I'm wondering if there's another catch. I mean when I first saw it on 'Which?' I thought, why hasn't it been on Money Savings Expert?

But perhaps it has and I missed it.

So thanks for your reply, I do appreciate it!:D

LizzyByTheSea

If you want to put regular small amounts aside, a cash ISA would let you do that, but unfortunately the interest rates on instant access cash ISAs can be pretty low, especially after the initial introductory period wears off. But it's still more than you'll get in a zero interest current account. Might check that Nationwide account out myself!

Archi_Bald

aprilthedog wrote: »

I've only just been able to navigate to my original post (I couldn't find the 'posts you made' link - told you I was a moron..)

But thanks for your advice and I think you're right. I've looked at 'Which?'s guide too, and they've highlighted a regular savings account by HSBC offering 6% interest. You have to bank with them - I don't and I'm not sure whether they'll let me in just to take advantage of this savings rate - and I'm wondering if there's another catch. I mean when I first saw it on 'Which?' I thought, why hasn't it been on Money Savings Expert?

But perhaps it has and I missed it.

So thanks for your reply, I do appreciate it!:D

It's only 6% if you have an HSBC Premier Account which costs a fortune. Normal current account customers get 4% on the Regular Saver.

If you want 6% you need to go to the HSBC subsidiary First Direct.

All the best Regular Savers are listed in the first few posts of this thread: https://forums.moneysavingexpert.com/discussion/comment/6932895#Comment_6932895