Isa to 123

Tykemal

Have i done the right thing by opening a Santander 123 account that pays 3% interest and transferring £20000 out of my Isa into the 123 account?
This leaves £22000 in my Isa.
Should i have left it all in my Isa?

jimjames

Tykemal wrote: »

Should i have left it all in my Isa?

Probably not. You realise you can get 4%/5%/6% on the remaining money if you move that out of the ISA too?

LXdaddy

What was the interest rate in the ISA? What would £20K earn as interest in the ISA for the next year?

3% gross on £20K is £600 that is taxable but might be at 0% if your total interest is less than £1,000 and you are a basic rate tax payer. Even if it is taxable at 20% then you would pay £120 in tax on the 123 interest.

Is £480 more than the interest on £20K in your ISA.

Of course interest rates will probably change in the future and the calculation will be different if ISA's start paying 3% tax free and current accounts start paying 0.05% gross - and then we'd all have to do some more calculations.

bigfreddiel

And don't forget the £60 annual fee!

fj

bigfreddiel

Tykemal wrote: »

Have i done the right thing by opening a Santander 123 account that pays 3% interest and transferring £20000 out of my Isa into the 123 account?
This leaves £22000 in my Isa.
Should i have left it all in my Isa?

I would have transferred it all to a stocks and shares ISA. Long term returns are better than interest accounts.

Ask yourself this, do you really think £11 per week interest is any good, or £1.50/day?

Cheers fj

jimjames

LXdaddy wrote: »

Of course interest rates will probably change in the future and the calculation will be different if ISA's start paying 3% tax free and current accounts start paying 0.05% gross - and then we'd all have to do some more calculations.

Had a chuckle when I saw that and watched the flock of pigs fly overhead

pathtofreedom

LXdaddy wrote: »

What was the interest rate in the ISA? What would £20K earn as interest in the ISA for the next year?

3% gross on £20K is £600 that is taxable but might be at 0% if your total interest is less than £1,000 and you are a basic rate tax payer. Even if it is taxable at 20% then you would pay £120 in tax on the 123 interest.
.

Depending on what tax rate you pay the first £500 or £1000 you earn outside the isa is still tax free come april, just something to bare in mind.

Tykemal

I am getting 1.5% interest on my Isa.
Ill be paying 20% tax on my interest for the 123 Santander.
I will have to look into a stocks and shares Isa.

eskbanker

Tykemal wrote: »

Ill be paying 20% tax on my interest for the 123 Santander.

Not after April 6th you won't! Unless you have no personal savings allowance left....

bowlhead99

bigfreddiel wrote: »

I would have transferred it all to a stocks and shares ISA. Long term returns are better than interest accounts.

Ask yourself this, do you really think £11 per week interest is any good, or £1.50/day?

Cheers fj

Yes, I think it is good. It's a rate that vastly exceeds central bank base rate and monthly libor and the current rate of inflation; there is no other single account paying as much interest on £20k with less than 2 year notice period; and no other investment product can offer the same reliable rate of return risk free and guaranteed.

So, I asked myself and decided yes, it is any good. Was it a trick question?

FWIW I don't have an account with Santander.

bigfreddiel

bowlhead99 wrote: »

Yes, I think it is good. It's a rate that vastly exceeds central bank base rate and monthly libor and the current rate of inflation; there is no other single account paying as much interest on £20k with less than 2 year notice period; and no other investment product can offer the same reliable rate of return risk free and guaranteed.

So, I asked myself and decided yes, it is any good. Was it a trick question?

FWIW I don't have an account with Santander.

Well, you're probably right, just wanted to point out what it actually generates, if someone offered to give me a pound every day I wouldn't turn then down.

Don't forget the £5 monthly fee, the two direct debits and the £500 monthly funding.

Good luck