£20k in old Santander ISA - transfer to Santander123?

wibbler

I have £20k in an old (just expired) Santander ISA. I also have a Santander 123 Current Account. I am a higher-rate taxpayer.

Am I right in thinking the best thing would be to just move that £20k to the 123 current account, which gets 3% (1.8% after tax)?

escapee

I'm sure others will come along and offer better advice wibbler, but what you could consider doing is opening a Santander 123 Current Account and placing the whole £20k into it intially.

Then open a Santander 123 2yr fixed ISA which has a preferential rate of 2% for 123 customers and transferring £17k into it. This way you will be getting 1.8% (after tax) on the full £3k and 2% tax free on the £17k

If you are a regular saver and have the option of adding to this, you can then 'top-up' the Current Account whilst still gaining 1.8% interest to a maximum of £20k. Just remember to set up at least two direct debits on the account and transfer £500 per month to gain the interest.

masonic

There are fixed rate bonds paying annual interest that might be worth a look. The first interest payment will be made in the next tax year, when you should have a £500 tax free interest allowance. The Santander fixed ISA is a more certain option though.

Regular Saver accounts, such as First Direct 6% are worth considering for some of the money for the same reason as above.

escapee

I've noticed an error in my calculations. Once you've taken money from an ISA and it loses it's protective wrapper, you can only transfer £15,240 (in any tax year) back into one.

Therefore you would have to leave £4,760 in the Current Account and place £15,240 into an ISA if you decided to do this.

masonic

escapee wrote: »

I've noticed an error in my calculations. Once you've taken money from an ISA and it loses it's protective wrapper, you can only transfer £15,240 (in any tax year) back into one.

Therefore you would have to leave £4,760 in the Current Account and place £15,240 into an ISA if you decided to do this.

No need to do this, the original ISA can be transferred in...

Can I transfer my cash ISA?

If you hold more than one Santander cash ISA, you can use the Santander Cash ISA Transfer Form, to combine any balances into a single cash ISA. If you are transferring in to a Fixed rate ISA with us, we need to receive your transfer application within 14 days of account opening.

http://www.santander.co.uk/uk/isas/2-year-fixed-rate-isa

wibbler

masonic - so are you saying escapee's first option is correct?

masonic

wibbler wrote: »

masonic - so are you saying escapee's first option is correct?

I'm saying if you want to take out the 2 year fixed ISA and put the money in that, then you should do so via an ISA transfer, not by withdrawing the money to your 123 account (because your balance exceeds the ISA limit for new money this tax year). You could withdraw any money you don't want to fix for 2 years into your 123 account before making the ISA transfer. This has the added benefit of preserving your ISA allowance should you wish to use it later in the tax year.

escapee

masonic wrote: »

No need to do this, the original ISA can be transferred in...

Thanks masonic, for some reason when I read the OPs post - I didn't notice that he already had a 123 Current Account and knew that for the preferential rate ISA you had to have one, hence why I went 'around the houses' of suggesting the opening of a 123 Current Account first and then transferring part of the money into a 123 ISA.

So, the choice is yours wibbler - you can transfer the FULL £20,000 into a 2 year fixed ISA at 2% tax free if you don't need to access it inside the next couple of years.

There are fixed rate bonds paying upto 3% but as you're a higher rate tax payer, this will be subject to tax - although as mentioned by masonic - the tax free interest allowance coming into force may make this a little more desirable.

wibbler

I want access to some of the money, in case of need.

So, in summary - best option is to put £3k into my 123 Current Account for easy access, and the rest into the 2% tax free ISA. Is that right?!

jimjames

wibbler wrote: »

I want access to some of the money, in case of need.

So, in summary - best option is to put £3k into my 123 Current Account for easy access, and the rest into the 2% tax free ISA. Is that right?!

It depends what you mean by best.

That's not the option that will give you the best return but it's probably the easiest.

If you want the best return then using accounts with TSB, Lloyds and Nationwide will give more interest.