Cash Isa or top fixed 1 year savings

meat_n2_reg

Hi 

Finally rates are raising so can get approx 2.7% on fixed rate 1 year fix 

Have 100k to save , so will split 50/50 with my wife 

50k @ 2.7% interest gives a return of £1350 , meaning paying tax on savings as over £1000 threshhold for both of us as basic tax payers 

Just wondering if worth putting some savings in a cash Isa at a lower rate or would still be better to be taxed on higher interest rate ?

Regards 

Expotter

It all depends on what ISA rate you can find. If each of you put £37k at 2.7%, interest earned would be £999 each. The other £13k (each) would have to be earning at least 2.16% in an ISA to get an equivalent interest to the 2.7% after 20% tax. At the moment I think the best one year fixed ISA pays around 2.1%, but this will probably be higher when they increase base rates in August.

Albermarle

It also depends on whether it is likely either of you will become 40% taxpayers at any point, as this will then possibly make the ISA route better.
Also once you 'lose' the £20K ISA limit for each tax year, you can not get it back.