ISA v Fixed rate account

ValiantSon

Reed_Richards wrote: »

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.

Most basic rate tax payers are still better off earning interest that will be taxed, given the disparity between interest paid on non-ISA and ISA accounts.

Most taxpayers on PAYE don't need to fill a self-assessment in for interest earnings. The banks report interest payments to HMRC.

Reed_Richards wrote: »

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.

No, with S&S it really is best to hold them in an ISA. While you may not breach the dividends allowance with a small sum it is worth keeping in mind that the dividend allowance has been dramatically reduced this financial year, and we may well continue to see reductions. Furthermore, all investments held outside an ISA are liable for capital gains tax (yes, there is an allowance) and the only way of realising money from investments is to sell them, so you open up the possibility of having to pay capital gains by not holding investments in an ISA. Finally, should you decide at a later date that you wish to move your investments into an ISA, you can't; you would have to sell the investments and then re-purchase within the ISA. This is not a great idea. All in all, the ISA allowance should be fully used for investments before you start buying in a general investment account.

Zero_Sum

ValiantSon wrote: »

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.



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.

Thats just being overally pedantic. If the current government reversed it, it would still be classed as a Tory u-turn. Also as this is something that benefits well off pensioners (who mainly vote Tory) it wont be reversed.

ValiantSon

Zero_Sum wrote: »

Thats just being overally pedantic. If the current government reversed it, it would still be classed as a Tory u-turn. Also as this is something that benefits well off pensioners (who mainly vote Tory) it wont be reversed.

No, it's called being accurate.

Pure speculation with regards to voter behaviour.