Quick question on savings tax allowance

t1redmonkey

So I'm currently below the £1000 interest/year threshold for interest, but expecting to go above it within the next 2 months or so.  In this situation, is it better to move £20k into a cash ISA asap in anticipation of going over the limit?  Or does it not really make any difference if I wait until I've hit the limit and then move £20k into a cash ISA at that point instead?  Trying to hold off going into a cash ISA if it doesn't make sense to do so due to their rates generally being lower than non ISA rates.

Dave_5150

Quick copy and paste below from the https://www.moneysavingexpert.com/savings/best-cash-isa/ page

- Basic-rate taxpayers over the PSA limit. For every £100 interest you earn in normal savings you only get £80, whereas in an ISA you get the whole £100. Therefore the normal savings rate would have to be 25% higher for it to beat a cash ISA.

- Higher-rate taxpayers over the PSA limit. For every £100 interest you earn in normal savings you only get £60, whereas in an ISA you get the whole £100. Therefore the normal savings rate would have to be 66% higher for it to beat a cash ISA.

EthicsGradient

Worth also thinking about when your taxable account(s) pays interest - is it monthly, or annually, and if the latter, what date? If you currently get it monthly, it might be worth moving some into a good non-ISA account that doesn't pay the interest until the next tax year, if there would be some room in the 23-24 year before you hit the £1000 mark. Remembering that completely closing an account means all accrued interest in it gets paid when you close it.

RG2015

t1redmonkey said:

So I'm currently below the £1000 interest/year threshold for interest, but expecting to go above it within the next 2 months or so.  In this situation, is it better to move £20k into a cash ISA asap in anticipation of going over the limit?  Or does it not really make any difference if I wait until I've hit the limit and then move £20k into a cash ISA at that point instead?  Trying to hold off going into a cash ISA if it doesn't make sense to do so due to their rates generally being lower than non ISA rates.

 Virgin Money has an easy access flexible ISA at 1.75%, which is pretty decent.

Otherwise, you may be better off paying the tax on interest earnings above £1,000.

To be a better option, the cash ISA would need to pay more than 80% of the non ISA rate. Most cash ISAs do not.