ISA or Santander 123 account

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Need all that expert advice out there.

I have £11,000 in a Virgin ISA with an interest rate of 2.40 gross, due to mature in January 2017. The interest rate is much better in my Santander 123 account and I know I would earn more each month if I transferred the £11,000 into Santander account because I already have a balance of £10,000 in the Santander account. However, not sure on the tax implications and I would lose out overall because I would have to pay more in text - help!

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  • LXdaddy
    LXdaddy Posts: 693 Forumite
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    What tax bracket are you in? The ISA is TAX FREE so 2.4% is what you get. The Santander 123 Account is subject to tax. if you are a basic rate tax payer then 3% less tax at 20% is 2.4% net. The return is less if you are a higher rate tax payer.


    But bear in mind that after April5th you will have a personal savings allowance of £1,000 or £500 so the actual tax deducted depends on how much other interest you earn as well as your tax band.


    Also check if the ISA has a penalty for early withdrawal.
  • bigfreddiel
    bigfreddiel Posts: 4,263 Forumite
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    Of course cash isas are virtually dead now you can earn £1,000 interest tax free.

    But if you are investing move your cash ISA to a s&s ISA. If and when you need to do a tax return this will make it simple because ISAs do not need to be declared. Great innit!

    fj
  • jimjames
    jimjames Posts: 17,668 Forumite
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    I know I would earn more each month if I transferred the £11,000 into Santander account because I already have a balance of £10,000 in the Santander account. However, not sure on the tax implications and I would lose out overall because I would have to pay more in text - help!
    It wouldn't be a very sensible thing to move £11000 into a Santander account that already has £10,000 in it as you wouldn't get interest on the whole amount. Was that really what you intended?

    You can get much higher rates with other accounts but the nearer to £20k you get the less the fee will impact the interest rate you get.
    Remember the saying: if it looks too good to be true it almost certainly is.
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