ISA or Santander 123?

Grandad99

I have £6,000 in a cash ISA, currently 2.3% but reducing to 0.25% when it expires in June. No hope of adding to it and wondering if it would be better to cash it and put the money in an existing Santander 123 account.

3% less tax is better than 0.025% tax free but is there any better alternative?

Krash420

If you have a Santander Account the 3% is certainly much better than the 2.3%, though I should note that 2.3% is hard to come by so I'm assuming you have a fixed ISA that was fixed some time ago. If that's the case then you should just wait for the ISA to mature, otherwise you may have to pay some of the interest you earn to close it early.

At that point you can then move it into your Santander Account, which after April 6th, will no longer be taxed at source, and you'll even have a £1000 tax-free interest allowance (£500 if you're an additional tax rate payer), but either way on £6000 you're very unlikely to need to pay any tax as soon as April 6th rolls around.

Though I should note that Interests from an ISA do NOT count towards the £1000 limit, and so it's only interest over £1000+ from a regular savings or current account that you need to pay tax on - and there's no way to reach that amount with a single Santander Account (max interest you can get is around £596).

Hope that helps.

Grandad99

Yes, I am waiting for the 2.3% ISA to expire in June before doing anything. The £6,000 won't bring the 123 account anywhere near the £20,000 limit for the 3% rate.

Thanks for your help.

Krash420

If that's the case then I would suggest you think of alternative accounts.

There are better accounts out there which will give you much more %'age than a Santander Account. For example:

• A TSB account gets you 5% on £2000
• A Nationwide account gets you 5% on £2500
• A Lloyds account gets you 4% on £4000

Though note that these are subject to some minimum conditions such as number of direct debits or transferring money into the account (though that is easily sorted by just transferring it from one of these accounts into your Santander, and then back again, all one the same day).

Dan83

Or you could put £2000 in the TSB @ 5%, £2500 in nationwide at 5% & the remaining £1500 in tesco @ 3%. Set up standing orders between TSB and nation wide to look after the minimum pay in's

Or

£2000 in TSB @ 5%, £4000 in lloyds @ 4%, again set up standing orders for the min pay in's and 2 direct debits for lloyds.

I'm not sure what would return the most interest per month, I'll leave that to you to work out, and there won't be any £5 account fee (if you meet all T&Cs) like there is with Santander.

If you do the above, Make sure you read and understand the T&Cs, don't just take my word for it.

Also if your balance is below £4000 in lloyds, you will only get 3% interest.

colsten

Dan83 wrote: »

Also if your balance is below £4000 in lloyds, you will only get 3% interest.

It's actually 2% or less

£4,000 to £5,000, you'll earn 4% AER / 3.93% gross on it all.
£2,000 to £3,999.99, you'll earn 2% AER / 1.98% gross on it all.
£1 to £1,999.99, you'll earn 1% AER / 1% gross on it all.

http://www.lloydsbank.com/current-accounts/club-lloyds2.asp

jimjames

Grandad99 wrote: »

Yes, I am waiting for the 2.3% ISA to expire in June before doing anything. The £6,000 won't bring the 123 account anywhere near the £20,000 limit for the 3% rate.

Thanks for your help.

Might even be worth moving before June if it means you are able to double the return on your money. Obviously if it's a fixed rate then that wouldn't apply.

badger09

jimjames wrote: »

Might even be worth moving before June if it means you are able to double the return on your money. Obviously if it's a fixed rate then that wouldn't apply.

I think the gain would be marginal.

It sounds like the Santander 123 2 year FRISA, which has 120 day penalty for early closure, so approx £46

Definitely not worth moving to Santander current account before maturity.