ISA Advice required...

sleepyhead78

Hi,

First post ever! Just joined. Just looking for some friendly advice from similar savers.

My wife and I each have eISA's with Natwest. Her's has approx £13K in it, mine has £6K. We also have a further £8K to add to either (doesn't matter whose ISA we add it to as far as we're concerned) since recently selling my car. We currently haven't added anything to our ISA's since the new tax year started last week.

I just wondered what people thought was the best thing to do ISA-wise moving forwards? We know we need to do something as our Natwest eISA's interest rates are about 0.5%, which is pretty poor obviously.

The thing is we also don't relly know that much about ISA's in general and how they work in terms of transferring. Can we transfer both into one? Then add the £8K of savings we've also got? Or can you only transfer one persons to a new one, then add mine to hers, plus the £8K savings? That would involve taking mine out of my ISA obviously which apparently isn't the done thing? I'll be totally honest, I just don't understand it when people say by taking it out of an ISA I lose my tax-free benefits? How exactly does that work? If I take my ISA money out of my ISA and put it in my current account, what and how do I lose out exactly?

Anyway, we don't care whose name the money ends up in, we just want to be making the most of our savings obviously. We don't really need access to it for a year or so we think.

Any ideas?

Cheers,

Sleepyhead78

TCA

ISAs are Individual Savings Accounts so you can't transfer from one person to another. But you can close your ISA and your wife can stick the funds in her ISA. It then legally becomes her money of course.

If you close your ISA and withdraw funds, then you lose the tax shelter for that money. i.e. you were paying no tax on the interest within the ISA. But you do now get a healthy annual ISA contribution allowance of £15,240 (any split you want between stocks and shares ISA and cash ISA, all cash if you want), so losing previous years' tax shelters might not matter to you and you could just use this year's allowance.

Plenty on here will recommend first using higher-paying current accounts like Santander 1,2,3 (paying 3% gross interest up to £20k, so even after tax is deducted, still better than most cash ISA rates if you're a basic-rate taxpayer), but it'll depend on your own circumstances and plans. You might for example wish to use some or all of your ISA allowance every year and at some point start using the saved up allowance for stocks and shares investing if paying higher-rate tax further down the line. A stocks and shares ISA also shelters them from capital gains if you sell, but you have an annual allowance of £11,100 to use against any profits on selling shares outside an ISA.

See the first post in Kazza's excellent thread below for the latest cash ISA rates, both fixed and variable:

https://forums.moneysavingexpert.com/discussion/401374