Are there any benefits in a cash ISA

Am I missing something? Every ISA provider I have checked offer a fixed rate cash ISA at 0.2% less than their fixed rate bond for the same investment period. 
10K invested at 1% would yield £100 less 20% tax leaves £80 
10K invested at .8% in an ISA would yield £80.  
The benefit in the ISA is enjoyed by the financial institutions, and non tax payers will miss out if they invest in an ISA.
As I said at the start - Am I missing something

Replies

  • AlbermarleAlbermarle Forumite
    8.4K Posts
    1,000 Posts Third Anniversary Name Dropper
    ✭✭✭✭
    Yes you are missing something. Basic rate taxpayers can earn up to £1000 in interest without paying tax .
    So non taxpayers and the majority of taxpayers will miss out by investing in  a cash ISA due to the generally lower interest rates on offer . The reason they offer lower rates is that they are more complicated to operate than a normal account due to the tax rules and reporting.
  • edited 18 November 2020 at 9:41PM
    ratechaserratechaser Forumite
    1.7K Posts
    Seventh Anniversary 1,000 Posts Name Dropper
    ✭✭✭
    edited 18 November 2020 at 9:41PM
    Still not a bad option for additional rate tax payers that get zero savings allowance...
  • droopsnootdroopsnoot Forumite
    1.5K Posts
    Part of the Furniture 1,000 Posts Name Dropper
    ✭✭✭
    The thing with an ISA is that you can only put in so much per year, and once the year has gone, that limit has gone too. So if we get back to a point where interest rates are higher again, you may regret not using as much of your annual limit - I regret not "getting in" sooner, just because I didn't spend any time researching and just let money in normal savings accounts. You just have to decide whether or not you think interest rates will rise enough to mitigate the lower interest you have to live with for now.
  • jooneejoonee Forumite
    6 Posts
    Sixth Anniversary First Post Combo Breaker
    Still not a bad option for additional rate tax payers that get zero savings allowance...
    Yes it makes sense for higher rate tax payers
  • jooneejoonee Forumite
    6 Posts
    Sixth Anniversary First Post Combo Breaker
    Yes you are missing something. Basic rate taxpayers can earn up to £1000 in interest without paying tax .
    So non taxpayers and the majority of taxpayers will miss out by investing in  a cash ISA due to the generally lower interest rates on offer . The reason they offer lower rates is that they are more complicated to operate than a normal account due to the tax rules and reporting.
    Sounds like you agree with me?

  • JustAnotherSaverJustAnotherSaver Forumite
    5.9K Posts
    Eighth Anniversary 1,000 Posts Name Dropper I've been Money Tipped!
    ✭✭✭✭
    joonee said:
    Still not a bad option for additional rate tax payers that get zero savings allowance...
    Yes it makes sense for higher rate tax payers
    Ah that group again. 

    This has to be the only place I know where people in the higher rate are referred to in a way that implies majority. Not saying you've implied that here but just saying. 

    I do wonder if a poll was ever conducted and answered straight instead of the usual politicians answer, what percentage of MSE would be higher rate, at least among the regular posters. 

  • AlbermarleAlbermarle Forumite
    8.4K Posts
    1,000 Posts Third Anniversary Name Dropper
    ✭✭✭✭
    joonee said:
    Still not a bad option for additional rate tax payers that get zero savings allowance...
    Yes it makes sense for higher rate tax payers
    Ah that group again. 

    This has to be the only place I know where people in the higher rate are referred to in a way that implies majority. Not saying you've implied that here but just saying. 

    I do wonder if a poll was ever conducted and answered straight instead of the usual politicians answer, what percentage of MSE would be higher rate, at least among the regular posters. 
    Approx 15% of taxpayers are paying some higher rate tax and about 2 % paying additional rate .
    I guess you are right that the % on here will be higher but a lot of regular posters are already retired , so more likely they are ex higher rate taxpayers rather than current ones.
  • edited 20 November 2020 at 6:52PM
    AlexlandAlexland Forumite
    8.6K Posts
    1,000 Posts Fourth Anniversary Photogenic Name Dropper
    ✭✭✭✭
    edited 20 November 2020 at 6:52PM
    ...and some of us put enough in our pensions, reduce our hours and decline taxable benefits to avoid being higher rate taxpayers.
  • masonicmasonic Forumite
    15.9K Posts
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    ✭✭✭✭✭
    ...then there are higher rate taxpayers who don't have enough cash savings to exceed their £500 Personal Savings Allowance.
Sign In or Register to comment.
Latest MSE News and Guides

Students - apply for uni funding NOW

If you plan to get a place via 'clearing'

MSE News

A guide to council tax bands

Lower your band & save £1,000s

MSE Guides