Top Cash ISAs Discussion Area

yesitwasme

Morven wrote: »

Although it does seem weird to be excited about a 2% rate..

Have to agree with you, very weird. UK inflation rate for Dec 2013 was er, 2%
Mind you, that's a soup song better than under the mattress, perhaps not as safe though :cool:
My recently bought Fidelity dividend income up 1.8% in 3 weeks :rotfl:

You'll probably get the last laugh.......:o

foreversummer

Just had a letter from Santander cutting their ISA Saver rates again.

New rates apply from 21st April 2014:

£1 - £9,999 0.5%
£10,000 - £24,999 1.00%
£25,000+ 1.50%

Thought it was too good to be true.

Foreversummer

eskbanker

yesitwasme wrote: »

a soup song

"Life Is A Minestrone" by 10cc perhaps?

badger09

foreversummer wrote: »

Just had a letter from Santander cutting their ISA Saver rates again.

New rates apply from 21st April 2014:

£1 - £9,999 0.5%
£10,000 - £24,999 1.00%
£25,000+ 1.50%

Thought it was too good to be true.

Foreversummer

Too good to last

gunmaker

badger09 wrote: »

Too good to last

It hasn't even started for us!!!:mad:

No letter yet though.

TooClumsy

Hey All,

Am new to this section of MSE, I have many questions about Cash ISAs. I have read several other threads and explanations-but can't quite seem to find what I want to know-or it is glaringly obvious (Its Behind You-Theatre Style moment)

Background: Married couple in their late 20s, saving up for a house deposit and am currently only using a Flex Saver from HSBC which I believe has a shocking Interest Rate. Currently has less than 2k in it-I would like to open an ISA for myself and for hubbie to open one.

Question 1
I understand that the total amount that is tax free is £5760, does that mean that depending on the interest rate %, the balance inc any interest accrued needs to be £5760, or just the amount deposited?

Question 2
What do most people do after they reach the tax free allowance?

Follow on:
If they continue to deposit beyond the allowance-are they still getting the same % interest rate as well as the tax on any interest gained?

Question 3
Once the tax year has finished-if you do not need the funds and choose to leave in the account-do you still carry on getting a tax free %interest rate-albeit a lower rate?

I would like to deposit as much as we can at the beginning of the tax year to take advantage of the %interest rate-do you deposit right near the threshold of the allowance or do you slowly deposit the money?

Any help would be very much appreciated!

TC

DragonQ

TooClumsy wrote: »

Question 1
I understand that the total amount that is tax free is £5760, does that mean that depending on the interest rate %, the balance inc any interest accrued needs to be £5760, or just the amount deposited?

The limit is on deposits into the ISA. Interest does not count towards this.

TooClumsy wrote: »

Question 2
What do most people do after they reach the tax free allowance?

Use regular savings accounts or stocks & shares I guess.

TooClumsy wrote: »

Follow on:
If they continue to deposit beyond the allowance-are they still getting the same % interest rate as well as the tax on any interest gained?

Do not exceed your ISA allowance. If you do it once, you'll likely just get the extra money back and a warning letter from HMRC. However, worst case scenario is your ISA may be closed, which'd mean your funds no longer protected from tax.

TooClumsy wrote: »

Question 3
Once the tax year has finished-if you do not need the funds and choose to leave in the account-do you still carry on getting a tax free %interest rate-albeit a lower rate?

Yes. ISAs continue to be tax-free until the government changes the rules. Decent interest rates rarely last more than 18 months so it's best to switch cash ISAs when their rates drop. Note that not all cash ISAs allow transfers in and you must use the official ISA transfer forms to do the transfer of funds; if you do it manually the money loses its tax-free status.

TooClumsy wrote: »

I would like to deposit as much as we can at the beginning of the tax year to take advantage of the %interest rate-do you deposit right near the threshold of the allowance or do you slowly deposit the money?

I've always deposited the full allowance immediately in early April. However, that's because the best cash ISAs have always had higher interest rates than standard accounts in previous years. That is not currently the case: you can get higher interest rates from current accounts (even if you're a taxpayer) than from the best ISAs, so it's not advisable to use your ISA allowance until the end of the tax year (or when a cash ISA with a decent interest rate appears).

ceredigion

DragonQ wrote: »

The limit is on deposits into the ISA. Interest does not count towards this.


Use regular savings accounts or stocks & shares I guess.


Do not exceed your ISA allowance. If you do it once, you'll likely just get the extra money back and a warning letter from HMRC. However, worst case scenario is your ISA may be closed, which'd mean your funds no longer protected from tax.


Yes. ISAs continue to be tax-free until the government changes the rules. Decent interest rates rarely last more than 18 months so it's best to switch cash ISAs when their rates drop. Note that not all cash ISAs allow transfers in and you must use the official ISA transfer forms to do the transfer of funds; if you do it manually the money loses its tax-free status.


I've always deposited the full allowance immediately in early April. However, that's because the best cash ISAs have always had higher interest rates than standard accounts in previous years. That is not currently the case: you can get higher interest rates from current accounts (even if you're a taxpayer) than from the best ISAs, so it's not advisable to use your ISA allowance until the end of the tax year (or when a cash ISA with a decent interest rate appears).

I'm not entirely convinced that ,that's right for sure you can generate slightly more interest in non isa accounts . However, If I deposit my full allowance early in the tax year , its a queuing interest into that account within the tax free wrapper, so my total amount within the wrapper for that year is more than it would be if you deposited the full allowance at the end of the year.

DragonQ

ceredigion wrote: »

I'm not entirely convinced that ,that's right for sure you can generate slightly more interest in non isa accounts . However, If I deposit my full allowance early in the tax year , its a queuing interest into that account within the tax free wrapper, so my total amount within the wrapper for that year is more than it would be if you deposited the full allowance at the end of the year.

That is true; you'd end up with more money in your ISA by the end of the year if you deposit early because you'd get more interest in that account. However, you'd end up with more money overall by depositing later.

Right now the difference is so large (1.75% ISA vs 3-5% current accounts) that it's not worth depositing early IMO:

£5940 x 1.75% = £103.95
£5940 x 3% = £142.56 after 20% tax
£2500 x 5% + £3440 x 3% = £182.56 after 20% tax

Archi_Bald

Yes of course, you get more interest if you start saving earlier.

This does not mean you get more interest in an ISA than in other accounts.

ISAs do not pay anything like the interest you can make in a number of other accounts.

Thus, if you save up throughout a tax year in another account and deposit it all into an ISA right at the end of the tax year, you have made more money than if you had had the money in an ISA all year long.

Also, depositing money into an ISA only makes sense if you are trying to build a tax-free balance. If you are going to spend the money in the next 3-5 years, you might just forget about ISAs alltogether.

If you are looking at a longer than 5 year timescale, you would most likely do a lot better on a S&S ISA than in a cash one.