£40K in easy access cash ISA with rubbish rate - move to a better cash ISA rate with a new provider?

Sniperwombat

I have £40K in an easy access cash ISA at 0.05% - should have sorted this long ago I know! I've read the guides saying as all interest on savings are tax free, I'm as well going for one of them rather than another cash ISA. I'm a higher rate tax payer. I also have other savings (ca £80k) in very low interest accounts which I need to deal with, but I want to sort the ISA first. I'm confused as to whether I should be transferring it to a new cash ISA or a savings account. Martin says "....before you opt for an ISA, check if you really need one – unless you're a top-rate taxpayer or have very large savings, you can get better returns with top normal savings " but I dont know what is meant by "very large savings" Any advice?

xylophone

See
https://www.moneysavingexpert.com/savings/personal-savings-allowance/

You say that you are a higher rate tax payer - this reduces your personal savings allowance.
You would be liable for tax on interest (non ISA) over £500 per annum.

You can get a much better rate on the ISA than the pittance you are currently receiving.
https://www.thisismoney.co.uk/money/saving/article-1583864/Best-savings-rates-Isas-Cash-Isa-accounts-fixed-rate-Isas.html
On easy access say  £360 per annum tax free.

As for the £80,000, say 1.15 % from NS&I - this would give £920 per annum.
You would pay tax on £420.

If you moved the £40,000 out of ISA into NS&I,  you'd be paying tax on £838.

Why would you wish to increase your tax bill?

Albermarle

https://moneyfacts.co.uk/isa/

masonic

£120k is a lot of cash to be holding. Is this money you intend to spend in the short term? If not, you could consider investing some of it.

grumiofoundation

Sniperwombat said:

I have £40K in an easy access cash ISA at 0.05% - should have sorted this long ago I know! I've read the guides saying as all interest on savings are tax free, I'm as well going for one of them rather than another cash ISA. I'm a higher rate tax payer. I also have other savings (ca £80k) in very low interest accounts which I need to deal with, but I want to sort the ISA first. I'm confused as to whether I should be transferring it to a new cash ISA or a savings account. Martin says "....before you opt for an ISA, check if you really need one – unless you're a top-rate taxpayer or have very large savings, you can get better returns with top normal savings " but I dont know what is meant by "very large savings" Any advice?

Current interest rates ~1%, therefore 120k will get you ~£1200 interest per year.
So assuming you are a basic rate tax payer (edit can't read!) You will pay tax on ~£700 of this interest (interest on ~70k) as HRT.  
So for that 70k of cash you could look at ISA, but current rates are still lower than non-isa savings even when tax taken into account.

All winnings from premium bonds are ta -free - you can put £50k in - average luck should return you ~1.2% (~equal to best easy access savings anyway).

Edited to reflect Higher rate tax payer.

xylophone

So assuming you are a basic rate tax payer

OP says

 I'm a higher rate tax payer. 

Sniperwombat

masonic said:

£120k is a lot of cash to be holding. Is this money you intend to spend in the short term? If not, you could consider investing some of it.

For various reasons I need it in cash really. I want to focus on the £40K at the moment, and want to be able to access it if needed for a house move.

Albermarle

https://moneyfacts.co.uk/isa/
https://www.nsandi.com/premium-bonds