Isa or bond question on interest . 23 March 2022 at 12:34PM in ISAs & tax-free savings 5 replies 121 views

alfmurph

My wife and i both retired on decent pensions have £140k savings .
We keep £20k in a easy access bank account for holidays , birthdays , christmas etc .
We have 4 weeks ago transferred £60k into two one year isa's . His and her accounts paying 1% .
We have another two isa's finishing late april which we need to decide on .
I was thinking of ditching isa for better paying bond . At the moment 1.75% .
If we make £600 interest on our isa's after a year does this count towards our personal savings allowance .
If it does investing the other £60k at 1.75% or maybe better come end of april would make us another say £1200 interest .
So adding the two interests together of £600 and £1200 gets us very close to psa . Plus a few pounds from the easy access account .
Any thoughts please .

MX5huggy

Presume at least some of the £60k was already in ISA and transferred so you didn’t exceed the £20k per tax year limit.

Interest earned on money in an ISA is not taxable, that’s the whole point. 

Should you be looking a investments if you have no plans to spend this money in the medium to long term? 

alfmurph

I see .
Yes £60k was in an isa and transferred .
Other £60k is also in an isa at the moment .
So you are saying the £600 interest  we will make from the isa's does not count to our psa . Is that correct .
So the only interest that would be counted is the £1200 from the bond if we go that way . Is that correct .
Medium to long term we might be dead .

Albermarle

So you are saying the £600 interest  we will make from the isa's does not count to our psa . Is that correct .

Yes that is correct .

You might want to take into account that the better interest rates for non ISA accounts usually easily compensates the fact that you might have to pay 20% on some of the interest.

Keep_pedalling

Do you have any short term plans for this money? If not then look at long term investments in a S&Ss ISA, cash ISAs are really an obsolescent product and not worth bothering with for most people. Interest rates are so low that the ISA does not protect you from interest on that amount as it is unlikely you would pay any on a non ISA product which will also pay a higher rate.

Dazed_and_C0nfused

If we make £600 interest on our isa's after a year does this count towards our personal savings allowance .

Is the savings nil rate band (aka Personal Savings Allowance) actually relevant?

Most people need to have taxable income of £17,570 before the PSA comes into play as there is the Personal Allowance and savings starter rate band (if available to you) which must be used before the PSA can be used.

So unless your existing pension income or earnings exceeds £17,570 you could have a much larger amount of (taxable) interest which can be taxed at 0%.