Nationwide Instant access ISA

Jimifan

Hi all,
I am confused. I am reading that no tax should be paid but they take tax off before adding the interest to my balance, is that right?
This is an old account that has had only £10 or so in it for years as I wasn't earning enough to save anything but now I am earning a little better and have been putting my money in Premium Bonds as interest rates are currently so low, but I was wondering whether it was worth putting some into it to show willing when we try for a mortgage.
Thanks for any info :-)

eskbanker

What makes you think they're taking tax off?

I wouldn't have thought that funding one of their savings accounts would make any difference to your prospects of a mortgage with them, but I don't suppose it would do any harm, although you'd need to take a view on whether you'd miss out on interest (from better accounts) in doing so....

refluxer

Interest earned from money in an ISA is completely free of tax, so no tax should be taken off it. That is the main benefit of having money in an ISA.

The T&Cs for my current Nationwide ISA state that "Your interest is paid free from income tax. The treatment of your account for tax purposes will depend on your individual circumstances. All tax information is based on our understanding of current law and HM Revenue & Customs practice, both of which may change. For more information visit hmrc.gov.uk"

As to whether it's worth putting money into the one you have, if it's an Easy Access account you've had for years than it's likely to have a very low interest rate - have you checked ? For comparison, the current best Easy Access Cash ISA is paying 0.67%.

The question you need to ask yourself first though is whether you actually need the tax-free status an ISA provides. A basic-rate tax payer currently has a Personal Savings Allowance of £1000, which means you can earn up to £1000 in interest from all your savings accounts without paying any tax on the interest.

If the total interest you earn from all your accounts is nowhere near that, then you can earn a similar rate of interest from the best Easy Access savings accounts at the moment, but a better option for you for saving from now on (not your existing lump sums) might actually be a Regular Savings account. These allow you to save a certain amount each month and you'll get a much higher rate of interest than any of the previously mentioned accounts. If you're a Nationwide customer, for example, they are currently doing a Regular Saver that pays 2% and you can save up to £200 each month. 2% is far higher than you'll earn in any other easy access account or ISA and more than twice as much as you'd expect to get back from Premium Bonds unless you're VERY lucky ! You just need to check the T&Cs for these RS accounts, as not all allow easy access to the money (the Nationwide RS is limited to 3 withdrawals per year, for example)

where_are_we

If you are serious about buying a house, are a first time buyer and under 40, then a LISA would be your best option, although you must hold it for at least 1 year before buying.

cheshirelabrador

Jimifan said:

but they take tax off before adding the interest to my balance, is that right?

No tax should be taken off interest being paid in to any savings accounts anymore. If you earn over £1000 in interest in a tax year then HMRC will take the money off you through your tax code, not the bank or building society. The £1000 doesn't include money paid in to ISAs or Premium Bond wins.