Are cash ISAs worth it

dont_use_vistaprint

I’m a HR taxpayer currently with around 75K split between Atom and Marcus and saving around 1-2K per month.

my understanding is it will be some  time before earnings from interest become taxable but everyone says make sure to use up your ISA allowance before April.

Surely it makes sense to do the opposite and keep it in non ISA accounts that pay more interest ?

At what point does a cash isa become a better option in terms of annual taxable earnings and total amount held  in savings

thanks 

Daliah

You have £500 personal savings allowance per tax year. Even with the dire rates in Atom and Marcus, you'd bust this with £75K.

So you should try and move some money into a tax shelter. Whether a cash ISA is the right place depends on whether you can find one that would pay more interest than you can get from normal savings accounts, and on your plans for the money which you haven't shared. Alternatives could be to increase your pension contribution, an S&S ISA, or even Premium Bonds.

dont_use_vistaprint

Are premium bonds excluded from the £500 allowance ? 

Is there an earnings limit where the £500 allowance ends ?

I don’t want to use S&S ISA, for future investment I have a pension so put extra into that 

I have no real plans at this time for my savings , it’s just money not spent accumulated over the past few years. 

So instant access and no risk of losses , other than inflation ; is the only real goals are to keep it safe 

Northern_Wanderer

https://www.moneysavingexpert.com/latesttip/#isas

Albermarle

Are premium bonds excluded from the £500 allowance ?

Yes , PB's are not taxable .

Cash ISA's are redundant for a lot of people, but they are still particularly useful for higher rate taxpayers with large savings ( like you ) 

EthicsGradient

Premium bonds are untaxed, whatever your tax band, so, yes, not counted in the £500 allowance. I don't think the £500 allowance ends at any upper limit (it's £1000 for basic rate payers). You can now get 0.9% on instant access accounts; £55,555 in one of the would earn the £500. 0.9% is also, as it happens, the rough effective rate premium bonds yield; they take a couple of days to get money out, and money has to be in a full calendar month to be eligible for the prize draw.

The best instant access cash ISA is now 0.85%; that puts it roughly competitive with premium bonds, if you want to access them at any time of month. Perhaps the thing to do would be have up to about £50,000 in an instant access account, and the rest in premium bonds (and if interest rates go up, transfer a bit out of the instant account to avoid going over £500). If you are taking money out just after the start of a month, it's efficient to do it from the premium bonds; at other times, from the instant account.

If you feel sure some of it won't be needed for a year, then you can get 1.7% (though that wouldn't go up if interest rates did, of course).

Daliah

dont_use_vistaprint said:

Is there an earnings limit where the £500 allowance ends ?

dont_use_vistaprint said:

So instant access and no risk of losses , other than inflation ; is the only real goals are to keep it safe 

Inflation isn't only a risk, it is a reality.

If you insist on keeping large sums of cash with no plans of using it in the near future, you might want to consider starting a "savings ladder" of fixed term accounts, e.g. 5 year accounts that you start in each of the next 5 years, and then continue when the first one matures. If you do this in ISAs, you can still get at your money in emergencies, albeit at the expense of some interest loss. Although fixing in the current climate might not be the best idea, as rates seem to be on the rise - ref the Chase UK 1.5% instant access account that appeared today.

Other rates : https://moneyfacts.co.uk/

dont_use_vistaprint

Daliah said:

dont_use_vistaprint said:

Is there an earnings limit where the £500 allowance ends ?

dont_use_vistaprint said:

So instant access and no risk of losses , other than inflation ; is the only real goals are to keep it safe 

Inflation isn't only a risk, it is a reality.

If you insist on keeping large sums of cash with no plans of using it in the near future, you might want to consider starting a "savings ladder" of fixed term accounts, e.g. 5 year accounts that you start in each of the next 5 years, and then continue when the first one matures. If you do this in ISAs, you can still get at your money in emergencies, albeit at the expense of some interest loss. Although fixing in the current climate might not be the best idea, as rates seem to be on the rise - ref the Chase UK 1.5% instant access account that appeared today.

Other rates : https://moneyfacts.co.uk/

Chase looks good, no international fees too unlike Revolut that caps it unless you pay for premium 

Daliah

dont_use_vistaprint said:

Chase looks good, no international fees too unlike Revolut that caps it unless you pay for premium 

Revolut is not [yet?] a bank in the UK, and they don't have the financial might of JP Morgan Chase.

Dazed_and_C0nfused

As you are a higher rate payer you should be aware that the non ISA interest is taxable and even when taxed at 0% (the savings nil rate, aka Personal Savings Allowance) the interest is also part of your adjusted net income.

So if you are impacted by the High Income Child Benefit Charge or withdrawal of Personal Allowance for ANI > £100k you could still have to pay extra tax as a result of having the non ISA interest.

dont_use_vistaprint

Dazed_and_C0nfused said:

As you are a higher rate payer you should be aware that the non ISA interest is taxable and even when taxed at 0% (the savings nil rate, aka Personal Savings Allowance) the interest is also part of your adjusted net income.

So if you are impacted by the High Income Child Benefit Charge or withdrawal of Personal Allowance for ANI > £100k you could still have to pay extra tax as a result of having the non ISA interest.

The last point does apply but do one-off pension payments I make directly reduce ANI the same way as salary sacrifice does ?