ISA v Fixed rate account

Zero_Sum

Wildsound wrote: »

1) There is no guarantee that the government will maintain the ISA allowance as it currently is in the future. They have already been cracking down on pensions (Lifetime Allowance crackdown, maximum contribution levels etc..) , it's only a matter of time before they start targetting ISAs as more and more of the countries wealth gets parked here.

True but unlikely given it was the current lot who massively increased it.

Im actually thinking of doing same. I'll leave a bit in ISA but move a chunk to a normal fixed rate where i can get about 1% more. So even if i end up paying a bit of tax, i'll still be better off.

Wildsound

Are you a first time buyer and (if so) is this a financial goal for you? If so, you should be looking at Lifetime ISAs and HTB ISAs as part of your research (guides at the top)

badger09

@ Cow girl

You might find this useful

https://www.moneysavingexpert.com/savings/which-saving-account/

jimjames

Cow_girl wrote: »

Reed_Richards
I am a standard rate tax payer and I have a little more to ivest with it .
I am looking to build up "a pot".
Thanks

If you are looking to build up a "pot" then you may want to look beyond cash savings for part of your money and look at investments. It does mean there is risk involved but over time it's likely to beat inflation and build a larger sum which isn't possible at 1.7% when inflation is higher.

Zanderman

Cow_girl wrote: »

(This is my first post ever) ((Forum Virgin!!))

I hope you're not too put off by the not-entirely-helpful banter going on the background throughout your first thread! You seem to be rising above it by ignoring most of it. Well done!

MK62

Cow_girl wrote: »

Wildsound
I have v small income and no chance of large bonus or inheritance etc
Cheers

You have a Personal Savings Allowance of £1000 (as you are a basic rate taxpayer).......and depending on your income, you may also have up to £5000 of 0% Starting Rate for Savings.

So, given that the best fixed rates for non-ISA accts at the moment are c. 0.5% higher than ISA rates, then it could certainly be worthwhile switching.

That £30k could be earning an extra 0.5%, or £150pa in return for doing very little.
Not a fortune, fair enough, but not to be sneezed at either.

Possible caveats are (as already stated in a prior post) the fact that unlike an ISA you may not be able to access the money if needed (NS&I are a notable exception), and you may need to pay attention to when the interest becomes available as that's when it also becomes taxable.

kidmugsy

polymaff wrote: »

Although there is no evidence that the OP holds a flexible ISA

Nor indeed evidence that she doesn't. It doesn't matter, though: if her iSA isn't flexible it's a doddle to transfer the money into one that is.

Reed_Richards

Cow_girl wrote: »

I am a standard rate tax payer and I have a little more to ivest with it .
I am looking to build up "a pot".
Thanks

If you build up "a pot" at some point you are liable to have to start paying interest on some of your savings. You don't want to do this because it cuts your effective interest rate and you may, at some point, have to start filling-in a Self Assessment form to declare this savings interest - which is a hassle that is best avoided if you can help it. Assuming that ISAs are still around when your "pot" gets to this size and assuming you won't be able to save as much per year as the ISA limit then it does not matter what you do now.

If you decided to invest in stocks and shares then a similar argument applies. if you have a big pot then an ISA is a good thing to keep it in, with a small pot it doesn't much matter.

Dazed_and_confused

The op has previously stated,

I have v small income and no chance of large bonus or inheritance etc

so she may well be able to utilise the £5,000 savings starter rate band where interest is taxed at 0%.

Once that is exhausted she can utilise the Personal Savings Allowance which is another £1,000 at 0% so the chances of her being liable to pay any tax on the interest is doubtful in the first place but even if she were it is highly unlikely that this on its own would be a reason to have to file a tax return.

Unless her interest was huge, above £10k I think nowadays.

ValiantSon

Zero_Sum wrote: »

True but unlikely given it was the current lot who massively increased it.

No it wasn't. The government who increased the ISA allowance was headed by David Cameron, and the Chancellor was George Osborne. Neither of these men are in the government anymore, nor, indeed, are they even in parliament. The current government is comprised of members of the same party as them, but they are a different government. You surely wouldn't argue that this is the same government - or "lot" - as Harold Macmillan's government, even though they are the same party? Theresa May was invited to form a government by the queen: this is a different govrnment.

Zero_Sum wrote: »

Im actually thinking of doing same. I'll leave a bit in ISA but move a chunk to a normal fixed rate where i can get about 1% more. So even if i end up paying a bit of tax, i'll still be better off.

In many instances using non-ISA accounts currently delivers a better return for cash, irrespective of the possible income tax that is accrued. I think that ISAs are largely (although not exclusively) best used for stocks and shares these days.