Isa for self employed?

kriso

I am a self employed designer. When I get paid, I put a percentage of my money into a seperate account. Then at the end of the tax year (end of Jan), I will have the money in there to pay my tax.

I currently put this money into a Nationwide e-saver account (5.80% at the moment). Of course I get taxed on my interest.

I don't currently have any isas. Would I be better off taking out £3000 from this e-savings account now, putting it into a mini cash isa to get more interest?

Come end of Jan, I will need to take the money out of the isa to pay my self employed tax.

I hope this makes sense,

Any advice most welcome,

jem16

Yes you will be better doing this as you will get interest tax-free.

kriso

Thanks.

But which accounts should I go for?

i.e. if on a mini cash isa the interest is added yearly, if I remove the money in Jan then will I not get any interest?

jem16

The best one is the NS&I direct ISA but you need a minimum of £1000 to open this and then £250 for each subsequent payment or £100 if it's a standing order. This may not suit.

Have a look at this thread for the best accounts.
http://forums.moneysavingexpert.com/showthread.html?t=401374

As to interest, if you closed the whole account interest would be added on at that point. If you just took out what you needed at that point, interest would be added after the year - you would not lose out either way.

isofa

Always open an ISA first as it's completely tax free (make sure it is instant access to fit in with your needs), then when you've used your 3K allowance, look at other savings accounts.

Milarky

It's a shame you can't 'prepay' something on your tax bill every month - and get a discount (equivalent to interest.) That way you could have your cake (provide for tax bill) and eat it (still have an intact annual ISA allowance.) As it stands you will 'lose' the tax exemption on the cash as soon as you withdraw it to pay HMRC.