ISA savings - remove to become new money or not ?

catwomanicola

I know the advice is never to withdraw savings form an (N)ISA if wanting to keep tax free status, but if wanting to take advantage of a better rate offered elsewhere that doesn't accept transfers in, does it really matter as long as the savings are below £15,000 ? I'm talking about £6-7,000 which is not even the maximum for one year, which could perhaps be withdrawn to effectively become new money to get around the 'no transfers allowed'. Would there be any downside to doing this ?

Vortigern

No real downside, unless you expect to receive a major lump sum soon.

bowlhead99

No. You can put £7000 in and still have £8000 of limit left for the year.

However, good luck finding an ISA account that pays you any more than you would be able to earn on the same money elsewhere after tax (top accounts pay 3%+ gross on that sort of money).

It looks like you are not the sort of person who runs out of ISA limit each year so makes more sense to save outside an ISA, get a better return, and then contribute to an ISA in some later year when ISA rates start to get better than what you could make outside after tax.

jimjames

catwomanicola wrote: »

I know the advice is never to withdraw savings form an (N)ISA if wanting to keep tax free status, but if wanting to take advantage of a better rate offered elsewhere that doesn't accept transfers in, does it really matter as long as the savings are below £15,000 ? I'm talking about £6-7,000 which is not even the maximum for one year, which could perhaps be withdrawn to effectively become new money to get around the 'no transfers allowed'. Would there be any downside to doing this ?

Have you already filled the 5% accounts?

If not then you might be better off to remove it from an ISA altogether and just keep it in the best paying account instead.

catwomanicola

Thanks guys. Pretty happy with things for myself, well as much as can be, I'm just trying to find out the best way of bumping up the limited savings for my teenage sons and advise them the best option as currently getting about 0.5%. I know nothing is great at present but think best to stick to ISA if possible, (they are currently students but will be working soon hopefully), and some of the better rates seem to be those not allowing transfers.

colsten

catwomanicola wrote: »

I know nothing is great at present but think best to stick to ISA if possible.

I think some current accounts and some regular savers are outstanding at present, and cash ISAs are the dumps - - -- except perhaps for teenagers, who can get up to 4% in JISAs. How old are your teenage sons?

catwomanicola

They are not young enough to qualify, they are 19 so only got the same choice as the rest of us ! Maybe you're right and they should move it out of the ISA to some other account. Being at university,they are rather tied in with their student bank accounts, but could perhaps open a second one.

bowlhead99

Generally the banks giving you student account perks (like big free overdrafts and other sweeteners) don't like you to go off and get second current accounts; and if you don't have a credit history or an income the people with the best rates may not really want you anyway. Still, worth a shot if they have any serious amounts of money to save. £1k for a year at 5% is of course £50 which is not to be sniffed at when you're a student.