ISA Rates are getting pathetic - How to Maximise Annual Return for a tax free person

JC_Maven

Tax free meaning yearly earnings under <£10K or whatever it is.

So i saw posted that 1 Nationwide Flex account Plus 2 TSB accounts then funnelled into an ISA in march 2015 is the best way to go.

My Stats:
Held ISA 2011-Now
7K in ISA right now (i got bait n switched into a 5 year no additions deal, dont ask)
Haven't used any of 2014 ISA allowance
~5K to put in this year (3K now 2K in 3months)

So as maths would have it i would think move 7K Immediately to a R85 approved monthly interest earning current account at 1.5% then in March move to a 1.5% ISA with the sum of 13K: ~3% return

Or seeing the clever switchy thing some people are doing to get 5% on a current account with min 1K payins a month switching it in and out every month plus 1.5% annual: ~6.5% return

So:
1. Is my maths right.
2. Is there a better way to do it and how would i go about doing it
3. what would be my tax situation

Thanks
Josh

kidmugsy

TSB 5% accounts: 2 accounts x £2000 each
Nationwide 5% account: £2500

That's more than enough to absorb your £5k.

What's the penalty for closing your fixed rate ISA? If it's 6 months interest, say, that's only a 0.75% penalty. So get the money out and bung it into better earners.

innovate

JC_Maven wrote: »

Or seeing the clever switchy thing some people are doing to get 5% on a current account with min 1K payins a month switching it in and out every month plus 1.5% annual: ~6.5% return

I think you may have misunderstood something somewhere along the lines. There is no current account that pays 5% and needs £1,000 a month - the TSB Plus is the best with 5% and needs £500 a month.

But leaving that aside, there is no additional 1.5% annual return by using some switching wizardry.

You would get significantly more for your money outside ISAs, and I can't see much reason why you would put £15K into an ISA this financial year at all. Why do you think you should use your 2014-15 ISA allowance?

eskbanker

innovate wrote: »

But leaving that aside, there is no additional 1.5% annual return by using some switching wizardry.

Perhaps OP has seen one of the threads explaining the Halifax Rewards method of enhancing returns on a smallish sum?

jimjames

innovate wrote: »

You would get significantly more for your money outside ISAs, and I can't see much reason why you would put £15K into an ISA this financial year at all. Why do you think you should use your 2014-15 ISA allowance?

It might be because that's what MSE tells users to do. Crazy advice and one that has no proviso at all as in the OP's situation there is absolutely no need to use an ISA at all until rates are better than can be obtained outside an ISA.

JC_Maven

kidmugsy wrote: »

TSB 5% accounts: 2 accounts x £2000 each
Nationwide 5% account: £2500

That's more than enough to absorb your £5k.

What's the penalty for closing your fixed rate ISA? If it's 6 months interest, say, that's only a 0.75% penalty. So get the money out and bung it into better earners.

Thanks, not sure the penalty for closing the account yet.

What about my 7k in ISA do you mean switch it to a different ISA holding? The most i'll get is like 2.75% on a 3yr fixed i think.

innovate wrote: »

But leaving that aside, there is no additional 1.5% annual return by using some switching wizardry.

You would get significantly more for your money outside ISAs, and I can't see much reason why you would put £15K into an ISA this financial year at all. Why do you think you should use your 2014-15 ISA allowance?

No reason to use the ISA allowance particulary as the other commenter suggested i only have ISA becuase it's always recommended on here, if i'd have realised that since i am under the tax bracket i would never have used it.

The additional 1.5% comes from dumping the whole load 13k into an ISA in March 2015 for the 1.5% annual interest or whatever the % interest is. Only thing is i don't know if you can do this, i suppose you can?

So:
1. Set up 2 TSB accounts + Nationwide = 5.5k at 5%
2. Rest: ISA 3 year fixed annual = 6.5k 2.75%
3. Move 5.5k into ISA in march 5.5k at 7.75% and 6.5 at 2.75
4. Do maths. 13k at 4.65% on average for the year.

Can we do better?

jimjames

If you dump money into an isa in march you will get 1.5% or whatever for that month. You don't get paid interest for time you've not had money in the account though, why would a bank pay that?

I don't get the 7.75% interest though, no ISA pays as much? No point using an ISA if you're not paying tax anyway and can do far better with accounts outside if you want the best return.

You may want to consider other options such as bonds and income funds if you are looking for the maximum income but that really depends what risk you are prepared to take.

kidmugsy

JC_Maven wrote: »

What about my 7k in ISA do you mean switch it to a different ISA holding? The most i'll get is like 2.75% on a 3yr fixed i think.r?

I was thinking that you could withdraw it from ISAs altogether and use interest-bearing current accounts instead. Look at the current accounts board.

guitarman001

I'm in a similar situation. ~£5.6k in cash ISA maturing shortly. ~£6.6k in stocks. The rest is in these higher % rate current accounts but as I'm a higher tax payer it really eats things up. Not keen on putting more into shares. We're really stuffed and it sucks.
I'm not married but how much can you gift a wife (or anybody??) and does that have to be done on some written contract?

jimjames

guitarman001 wrote: »

I'm not married but how much can you gift a wife (or anybody??) and does that have to be done on some written contract?

If it is a gift then it isn't a contract, you no longer have that asset/money. If not then it is a loan and you could do a contract

JC_Maven

Hey Guys

I actually don't have time to be messing around with all these accounts, so where is the best one place i can move all the money right now?

Then when i get more time i'll play with all the individual accounts like recommended.

Thanks