Is now a good time to open a new Cash ISA or should I wait until April? 15 January at 4:26PM in ISAs & tax-free savings 13 replies 584 views

Dellphillius

Hi all,

I'm hoping for some clarification regarding Cash ISAs. I've done some research on the matter and I'm pretty confident I understand the rules, however, I'm hoping some of the more financially savvy can confirm a couple of things, please.

I currently hold all of my savings in a Cash ISA. This matures in April. I plan to transfer the whole amount in one go to another provider (with a better rate) in April. The balance is close to the FSCS protection limit so I intend to leave that one as it is with no further transfers.

I want to open a second one and start making monthly deposits. I believe this is OK as my main one will be a transfer and the second will be fresh with frequent top-ups. If this is incorrect, I'd appreciate it if someone could clarify.

My main question is when would be a good time to open this second account as I'm keen to get the best rate possible. Would it be good to open one now and take advantage or wait until March/April with the hope of a better rate?

Many thanks in advance.

eskbanker

Once upon a time March and April used to be when cash ISA rates were noticeably better than at other times, but I think that's in the past now, but if the second account (for regular funding) is to be an easy access one then you can transfer it around to get better rates if the situation changes after opening.

Dellphillius

eskbanker said:

Once upon a time March and April used to be when cash ISA rates were noticeably better than at other times, but I think that's in the past now, but if the second account (for regular funding) is to be an easy access one then you can transfer it around to get better rates if the situation changes after opening.

Many thanks for the response and information, that's really helpful.

Albermarle

The peak of rates for fixed term savings accounts seems to have passed. The probable further couple of rises in the BofE interest rates have already been factored in.
However further BofE rates increases may push up easy access and short notice rates up a bit more.

Dellphillius

Albermarle said:

The peak of rates for fixed term savings accounts seems to have passed. The probable further couple of rises in the BofE interest rates have already been factored in.
However further BofE rates increases may push up easy access and short notice rates up a bit more.

Thank you, I appreciate the info. I think I'll hold off for a couple of months and see what's out there.

k_man

Have you paid anything into your current ISA in this tax year?
If so, you can't pay new money (your potential monthly payments) into another until the next tax year.

One reason (which may not apply to you), for opening and paying into a ISA before April (assuming you can based on the above), even if you are expecting rates to improve after April, is to use this year's ISA allowance.

After April, this year's allowance of £20k of new money is gone.

Flexible ISAs that allow you to take the money out/in during the tax year can be useful for this.

GrubbyGirl_2

Dellphillius said:

Hi all,


I currently hold all of my savings in a Cash ISA. This matures in April. I plan to transfer the whole amount in one go to another provider (with a better rate) in April. The balance is close to the FSCS protection limit so I intend to leave that one as it is with no further transfers.

You don't have to leave it in one pot especially if close to the FSCS limit - you can do 2 or more partial transfers

jimjames

Dellphillius said:

I want to open a second one and start making monthly deposits. My main question is when would be a good time to open this second account as I'm keen to get the best rate possible. Would it be good to open one now and take advantage or wait until March/April with the hope of a better rate?

The best rates are unlikely to change much but if you're paying in monthly then it's likely to be an instant access ISA so you can move easily to another provider. Fixed rate ones are unlikely to be suitable as they normally have a very short window to fund them and you can't add more after that. Depending on the amount you want to save each month you might find that a non ISA regular saver account would be better and you can then put the money into an ISA when that matures after a year.

Dellphillius

k_man said:

Have you paid anything into your current ISA in this tax year?
If so, you can't pay new money (your potential monthly payments) into another until the next tax year.

One reason (which may not apply to you), for opening and paying into a ISA before April (assuming you can based on the above), even if you are expecting rates to improve after April, is to use this year's ISA allowance.

After April, this year's allowance of £20k of new money is gone.

Flexible ISAs that allow you to take the money out/in during the tax year can be useful for this.

Thanks for your response.

I haven't paid anything into it this tax year. My last deposit was Feb 2022 so I've not used any of this year's allowance. I won't be anywhere near exceeding the £20K max each year anyway but I could open a flexible one now and move it should I want to.

Dellphillius

jimjames said:

Dellphillius said:

I want to open a second one and start making monthly deposits. My main question is when would be a good time to open this second account as I'm keen to get the best rate possible. Would it be good to open one now and take advantage or wait until March/April with the hope of a better rate?

The best rates are unlikely to change much but if you're paying in monthly then it's likely to be an instant access ISA so you can move easily to another provider. Fixed rate ones are unlikely to be suitable as they normally have a very short window to fund them and you can't add more after that. Depending on the amount you want to save each month you might find that a non ISA regular saver account would be better and you can then put the money into an ISA when that matures after a year.

Thanks for your comment, I appreciate your insight.

My plan is to transfer my existing one into something with a better rate and not add anything to it. I'll put this into a 1 year fixed and then move it each year.

I want to start a second saving account now and build that one up.

I did see Martin's show back in November where he discussed saving accounts having better rates than ISAs, so that's something I should investigate. I'm just a bit unclear on the tax side of things but I won't be saving a huge amount each year. I'm looking at putting away around £500 per month.

Thanks.

Albermarle

I'm just a bit unclear on the tax side of things

There are numerous threads/questions/answers on this subject on this, and the main Savings and Investments board. So maybe worth spending some time scrolling through them. Plus
What is the personal savings allowance? (moneysavingexpert.com)
Tax-free savings: check if you're eligible - Money Saving Expert