Should I be opening a Cash ISA?

Savingforahouse123

My goal is to buy my first house.

I was close to doing this however I wasn't in a good space from a mental health perspective which led to me quitting my job with nothing lined up (I decided for my own sanity I'd rather do that than continue to work somewhere I didn't like). I felt that I didn't want to jump into a similar role and knew a career change is needed. I'm in the process of starting a new role but it could take 6 weeks before I start as I need to get an enhanced DBS check (what they now call a CRB). My salary will drop dramatically to about £21.5k but currently I'm not working. Below are my current finances:

Moneybox S&S Lifetime ISA. £20,525 

HSBC Help To Buy ISA (that I use as a savings account). 1% AER. £11,643 (generates about £8.61 interest per month)

Goldman Sachs Marcus account. 0.7% AER/Gross. £54,410 (generates about £28 interest per month)

Virgin Money M Plus Current. 2% up to £4k. £4,000 (generates about £6.8 interest per month)

TOTAL: £90,577.75
Total yearly interest: £521

I then have £8.5k in crypto. I also have £2.6k in stocks. So I have about £100k in total. 

I've been considering opening a cash ISA. Would it be worth it based on my salary and interest on savings? Alternatively I'll move my money from my Goldman Sachs Marcus account to a Chase bank account which has better interest at 1.5% AER up to £250k.

Daliah

With a salary of £21.5k, you are a BR tax payer. As a BR tax payer, you have a personal savings allowance of £1,000.

If you move your money from Marcus to Chase, and keep your VM accounts, your interest will be just under £900. Unless you plan to add a lot to your savings, there's therefore no pressing need to look for a different tax shelter. Presumably you will also move some more into your LISA, so your cash float reduces slightly.

Depending on your plans for buying, you might want to consider a 2-year fixed term ISA as that would pay more than Chase. Though I would personally not fix anything right now as I feel rates will creep up a bit more before long.

JakeHyde

There is a great youtube video by Chris Bourn on how Cash ISA's, are not as effective as S&S ISA's.
Have you considered adding to this/next years S&S ISA?
Or Getting Premium Bonds? Arguably their interest rate isn't as attractive, but I won £150 and I only opened (maxed out) my ISA a few months ago.

I'd love to get into crypto, but I dont really understand it.  I got £100 of bitcoin via FTX, and couldn't figure out why I had to exchange my GBP into USD, and buy Bitcoin, when I could just exchange straight to Bitcoin from GBP! haha  

I WISH I put a few thousand on when the price was low a few months ago.

Savingforahouse123

Daliah said:

With a salary of £21.5k, you are a BR tax payer. As a BR tax payer, you have a personal savings allowance of £1,000.

If you move your money from Marcus to Chase, and keep your VM accounts, your interest will be just under £900. Unless you plan to add a lot to your savings, there's therefore no pressing need to look for a different tax shelter. Presumably you will also move some more into your LISA, so your cash float reduces slightly.

Depending on your plans for buying, you might want to consider a 2-year fixed term ISA as that would pay more than Chase. Though I would personally not fix anything right now as I feel rates will creep up a bit more before long.

Thank you. Having looked into this more, I have a feeling my Help to Buy ISA could actually be a Cash ISA anyway? Does that sound right? 

I opened up the HSBC Help to Buy ISA as the interest rate was very high back then but with the arrival of Chase Bank at 1.5%, do you think I should move my Help to Buy ISA money to Chase? 

Daliah

Apologies, I have no idea why I thought you had a LISA, as you never said you had a LISA 

If you moved the entire balance from your HSBC ISA wrapper to Chase, you'd get another £175 a year in interest, i.e. you would bust your Personal Savings allowance and pay tax on at least £75, i.e. £15. And you'd lose the HTB ISA Government Bonus.

You could fine-tune things by moving some of your HSBC ISA to Chase but I am not sure whether it would be worth the hassle because you'd lose the Govt bonus on the withdrawn money, and sooner or later you'd bust the personal savings allowance again, and then be grateful if you can use your ISA.

Savingforahouse123

Daliah said:

Apologies, I have no idea why I thought you had a LISA, as you never said you had a LISA 

If you moved the entire balance from your HSBC ISA wrapper to Chase, you'd get another £175 a year in interest, i.e. you would bust your Personal Savings allowance and pay tax on at least £75, i.e. £15. And you'd lose the HTB ISA Government Bonus.

You could fine-tune things by moving some of your HSBC ISA to Chase but I am not sure whether it would be worth the hassle because you'd lose the Govt bonus on the withdrawn money, and sooner or later you'd bust the personal savings allowance again, and then be grateful if you can use your ISA.

I do have a LISA. I have a Stocks and Shares Lifetime ISA as well as a HSBC Help to Buy ISA (which I believe is a Cash ISA). I use the HSBC Help to Buy ISA as a savings account and will use the LISA when it comes to buying my first property. So when I buy my house I won't get a Government bonus from my Help to Buy ISA as it's only being used as a savings account (I'll get the £1k bonus each tax year from my LISA though as I top up £4k each tax year).

Bridlington1

Since you aren't earning enough interest to pay tax on, I don't see any benefit to opening a cash ISA, particularly given you can't pay into a Help to Buy ISA and a cash ISA in the same tax year.

I would probably look at regular savers and drip feed your savings into them as they tend to pay a good amount of interest and many of them are easy access so if you do decide to buy before the term ends you can still access your cash and not lose any interest. It's important to note that having a good credit score will improve your likelihood of getting a mortgage so I wouldn't go opening every regular saver available as that will cause some serious short term damage.

If you are not planning on buying in the next year then maybe consider getting a Natwest/RBS digital regular saver (both at 3.3% variable), which you can put up to £150/month in and possibly more if you use their round ups feature, or failing that get a Nationwide monthly saver (2.5% variable). If you are planning on buying in the next year there are some regular savers which do not require you to open a current account (i.e Saffron BS).

I hope this helps.