ISA or pay tax

Keep_pedalling

RG2015 wrote: »

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"?

Even after paying tax, you have been able to earn more interest outside an ISA than in it for a long time now, and that fact that you can now earn £1000 of interest outside an ISA without paying any tax it means the differential is even greater. The last cash ISA I hade paid 6% around 7 years ago.

Not sure how much the OP has in cash but as it brings in over £1000 and the interest rate is below 2% it’s got to be pretty substantial. Cash for me is simply to be used as an emergency fund.

RG2015

Audaxer wrote: »

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

It's a technical issue. There is a personal savings allowance (PSA) that is worth £1,000 to a basic rate taxpayer making it a zero % tax rate.

If it were a tax allowance it would be £1,000 for everyone.

Keep_pedalling

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

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

If I want to transfer from one S&Ss ISA to another I would do it directly. Just needs me to fill in one form, no need to take convert to cash first, which in any case would be restricted to however much I had remaining on my annual allowance.

Dazed_and_confused

Audaxer,

“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.
Originally posted by Dazed and confused
”I don't understand that point. You don't pay any tax of the first £1,000 of interest earned on taxable savings.

Take for example a higher rate payer earning (for simplicity) a taxable salary of exactly £100,000. They get full Personal Allowance of £11,500 (current tax year). But if they had £500 savings interest their total taxable income would be £100,500 and their Personal Allowance would only be £11,250.
The savings interest would be taxed at the personal savings allowance rate of 0% but their overall tax payable would increase by £100 so although you might see the savings interest as "tax free" they actually have an effective tax rate of 20% on the savings interest.

Similar things affect some of those who have Child Benefit and also elderly married pensioners who get the Married Couples Allowance.

AirlieBird

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?

2 years is not "many". And just because they are pointless for you doesn't mean they are pointless for other people's circumstances.

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

That's 2 days running you have referred to Atom 1 year at 1.85. Atom 1 year has been 1.7% since Wednesday.

Keep_pedalling

AirlieBird wrote: »

2 years is not "many". And just because they are pointless for you doesn't mean they are pointless for other people's circumstances.

You have been able to to get higher net interest rates outside of ISAs for a lot longer than two years, and for the vast majority of people there are better options. I am astounded the so much cash is still piled into them.

18cc

Wow down to 1.7% just can't keep up with the fall in savings rates since the base rate was raised Tesco Birmingham Midshires and now atom hope they don't raise base rates again or savings will really tank

593jim

Thanks for all the advice. As pointed out interest rates on the Atom and Birmingham & Midshires acounts now lower.
Anyone any thoughts on low cost stocks and shares ISA ie Tracker, the only one who seems to be getting a decent return on my funds is the FA!

593jim

At my time of life I am not looking for long term investments.

billpaul812

Why hasn't anyone suggested a stocks and shares ISA, aka Hargreaves Landsdown, even with their Conservative Portfolio would improve the return considerably?