Benefits of new ISA days before finishing tax year

carlsorff

Hi!

Just got the newsletter from Martin urging to open an ISA account before the tax year finishes...everything is fine with this, but never understood what's the benefit of putting the money in an ISA 3 days before starts a new tax year. I've got around £10K sitting in my normal bank account. I'm not getting any interest as expected...so if I put tomorrow friday this amount of money in an ISA, what will happen? Will I get 1.50% interest in 2 days? Never understood how it worked despite reading and trying to learn about this.


Many thanks

C

Gram_Parsons

If you put the 10K in this year's ISA then you'd have the full allowance for next year available to you in a few days time. That's pretty much the only benefit i.e. if you have loads of money to use your full allowance every year. You would get whatever the interest rate is on the 10K for a couple of days but that's it.

Gram_Parsons

Oh, and there's plenty of better current accounts where you would get interest on your money!

jimjames

If you put that money into current accounts you'd get between 4% and 5% interest. I really can't see what the fuss is about using an ISA at 1.5%.

ratechaser

I think for most people, this last minute 'rush' is a bit of an anachronism. In years past where the contribution limits were relatively low, and when banks historically brought out good rates around this time to tempt people that hadn't already put money away - ok, it was a reasonable thing to remind people not to miss out.
Now the limits are much higher, and there's little incentive for banks to offer good rates (as they are already sitting on a mountain of cheap money), it's all become a bit of a damp squib. In theory, it still could make sense for the 45% tax payers with large amounts of cash to save. But even then, many will have done the same as me, i.e. already put the full allowance into an ISA right at the start of the tax year to max out whatever little benefit is available!

Newly_retired

The main point is surely to beat the annual deadline to stow away savings where the interest is non taxable and doesn't have to be declared on a tax return.
And once they are there, tax free, they can mount up. So some people who have always been able to put the full amount away every year will have a decent amount stashed away free of tax.

The fact that cash ISA rates are lower than current accounts means that for most people it isn't worth it.