Savings advice

Cookiepops

I have a saving in an ISA with a interest rate of only 0.5% Am I better off transferring this into a non ISA savings account?

Pompeydave1967

I would , opening up an easy access will give you a much better rate. And of course it all depends how much you have in savings .Or put into a 1 yr fix .

CheekyMikey

If you are a basic rate taxpayer, you are almost certainly are better off having the highest interest bearing account you can get. You get up to £1000 interest tax free anyway. Even if you have so much savings that you earn over £1000 interest, as long as the interest rate of the non isa savings account is more than 25% above the isa rate you’ll be better off.

Bridlington1

It depends on your income and how much you earn from interest:
-If you earn less than £12570/yr you can earn £6000 of interest without tax (£5000 starting savings allowance plus the £1000 personal savings allowance).
-If you earn between £12570 and £17570/yr you can earn your total income including savings minus your total income excluding savings tax free
-If you earn over £17570/yr you can earn £1000 of interest tax free per year if you are a basic 20% tax payer, £500 if you are a higher 40% rate tax payer and £0 tax free if you are an additional rate tax payer.

If you would not need to pay tax on your savings interest if they were outside of an ISA then transfer your savings to a non-ISA savings account. If you would need to pay tax on your savings interest or are close to the threshold for paying tax on savings interest then you are likely better off keeping some of your savings in an ISA and switching your ISA to a better paying ISA. I personally wouldn't fix at the moment given how quickly interest rates are rising and keep any savings in accounts that have either a variable interest rate or are easy access but that is down to personal preference.

The ideal position to be in would be to earn as much interest as you can outside of the ISA without going over the tax threshold and keep the rest in an ISA. As mentioned above if the non-ISA account pays more interest with tax taken off than the ISA pays then get rid of the ISA.

Cookiepops

Sorry I am a higher rate taxpayer, I should have put that in most

eskbanker

The first thing to do is to establish what this pot is earmarked for - is this emergency fund money that needs to be readily accessible, or maybe intended for use for a large future purchase, or just for retirement, etc?  It could obviously include all of the above, and more, so you don't necessarily need to do the same thing with all of it.

If you want to keep it in savings form, eliminating the likes of investing (within a pension or more accessibly), then your next choice would be the extent to which you can take advantage of fixed term products that would lock it away for one or more years, in return for less flexibility.

Once you've gone through those thought processes, it would be time to think about interest rates, and the guidance on here would always be to measure net return, i.e. just because ISAs are tax-free doesn't necessarily make them better than earning higher interest but paying tax on some of it.

You should also consider the extent to which you wish to preserve your ISA funds within that wrapper - if you've built up, say, £50K then it would take multiple years to get the equivalent back into the ISA shelter in future if you wished to do so.

Albermarle

Cookiepops said:

Sorry I am a higher rate taxpayer, I should have put that in most

Probably as a higher rate taxpayer, you may be better off leaving it in a cash ISA savings account as you will pay 40% on any interest over £500 . However you need to consider the points in the previous post.
Having said that there are even  easy access ISA savings accounts paying more than 0.5%
Compare The Best UK Savings Accounts | moneyfacts.co.uk