ISA or pay tax

593jim

I am loath to put money into any ISA over 1 year at the moment as interest rates are predicted to rise next year.
My problem is do i go for the best 1 year rate at 1.41% or a straight instant bank saving account at 1.85% and pay tax and end up with 1.48%.
I will be over the £1000 tax free allowance.

Keep_pedalling

Cash ISAs have been pointless for many years now so no don’t bother with that. Any particular reason you want to hold so much in cash?

Dazed_and_confused

There isn't really a £1000 "tax free allowance".

All savings interest excluding normal non taxable things like ISA's is still taxable so even when it is taxable at 0% under either the starter savings rate or personal savings allowance rate it can result in a higher overall tax bill.

All depends on your specific situation but as you mention £1000 it sounds like you're not a higher rate payer and so unless you are claiming Married Couples Allowance and have income of getting on for £30k it may well not be an issue for you personally.

18cc

The thing I like about a cash ISA if it has a large balance in it is that it is very easy to transfer from one provider to another if you decide you want to move to get a better interest rate for example

if you have the money in a non ISA savings accounts then the normal way to do it is to transfer to your current account and then pay it out from your current account to the new savings account

the problem with this is there are usually daily limits or you come across the Fraud triggers which mean you have to go into the branch and prove your identity etc etc

Transferring an ISA even a large amount it is very easy

RG2015

593jim wrote: »

I am loath to put money into any ISA over 1 year at the moment as interest rates are predicted to rise next year.
My problem is do i go for the best 1 year rate at 1.41% or a straight instant bank saving account at 1.85% and pay tax and end up with 1.48%.
I will be over the £1000 tax free allowance.

Just out of interest, which straight instant bank saving account pays 1.85%? The best one I can see is 1.30% which nets out at 1.04% after 20% tax.

18cc

I think he might mean that straight instant atom bank savings account 1 year at 1.85% it's not instant access but then he didn't say it was

RG2015

18cc wrote: »

I think he might mean that straight instant atom bank savings account 1 year at 1.85% it's not instant access but then he didn't say it was

Okay, thanks.

I just assumed that an instant bank savings account implied instant access rather than instant something else.

Dorian1958

You may want to think about going for the 1 year ISA fix to avoid tax on the interest and then IF interest rates rise enough to warrant a switch, the hit on the penalty may be worth taking and easily calculated and compared with the benefit of the new rate (e.g. 60 days loss of interest on the amount withdrawn with Virgin Money e-isa.) They cant stop you from taking it even if it is fixed for a year.

jimjames

18cc wrote: »

The thing I like about a cash ISA if it has a large balance in it is that it is very easy to transfer from one provider to another if you decide you want to move to get a better interest rate for example

I'm not sure that sticking with low rates for that reason is worth it but each to their own.

I'd echo the question above as to why you need so much cash if you're looking for a decent income from your money

RG2015

Keep_pedalling wrote: »

Cash ISAs have been pointless for many years now so no don’t bother with that. Any particular reason you want to hold so much in cash?

jimjames wrote: »

I'm not sure that sticking with low rates for that reason is worth it but each to their own.

I'd echo the question above as to why you need so much cash if you're looking for a decent income from your money

I am intrigued by the points raised in these two posts.

Why are cash ISAs pointless (other than for small amounts of cash) and how much is "so much cash"?

Audaxer

Dazed_and_confused wrote: »

There isn't really a £1000 "tax free allowance".

All savings interest excluding normal non taxable things like ISA's is still taxable so even when it is taxable at 0% under either the starter savings rate or personal savings allowance rate it can result in a higher overall tax bill.

I don't understand that point. You don't pay any tax of the first £1,000 of interest earned on taxable savings.