Why open an ISA before 5th April 2023?

catsense13

I’ve never been in a position to save until recently so I know little to nothing about saving options. I’ve been putting away £170 a month for a while and now have just over £1000 in a TSB Spend and Save account (I like the separate money pots to divide my savings for different purposes as I’m planning on a Christmas holiday to Lapland). I’ve just opened an ISA with Tesco because I’ve been reading hype about using your tax free saving allowance before it expires 5th April. Now that I’m looking to transfer my savings, am I right in thinking that I won’t receive any interest payments on my savings for a year from now? Since I plan to use most of my savings on booking a holiday in September, have I just opened an ISA for no reason? 🙈

refluxer

The first thing to consider before you pay any money in is whether you actually need an ISA at all. Basic rate tax payers, for example, get a PSA (Personal Savings Allowance) which essentially allows them to earn up to £1000 a year in interest before paying any tax on it so if you don't earn anywhere near that, then the tax-free benefit of an ISA won't be needed and your money may actually be better off in the equivalent non-ISA account, as these often pay a higher rate of interest.

What type of Tesco Cash ISA have you opened ? You'll be fine to access the money any time if it's Easy Access but would have to pay a penalty if you needed to access money in a fixed rate account before the maturity date and, under some circumstances, this can lead to you getting back less than you put in. 

£1000 isn't going to earn a huge amount of interest in 6 months so it doesn't sound to me like you necessarily need that in an ISA, that is unless you have a lot of other savings tucked away ?

jimjames

If you've got £40k in an taxable savings account then it's probably worth getting an ISA opened before April and then another after April to get both allowances. BTW the allowance doesn't expire, it just resets so you have another £20k available which isn't really an issue for you.

If you've got £1000 then there is much less urgency to do so as you're still well within the limit for next year too. That doesn't mean it was a waste of time but for that sort of amount getting the best interest rate is probably more important than whether it's an ISA or not.

Albermarle

You are getting confused between the terms of the savings accounts and the ISA rules. They are two separate items.

Cash savings accounts can be easy access, or can be accounts where you have to give some notice to withdraw, or can be fixed term where you can not access the money for a fixed period. The interest rate tends to be higher the more the money is 'locked up' 
You can have the above accounts as an ISA , or not.
Having them as an ISA means that all interest generated is non taxable, but there is a limit of how much you can add = £20K per tax year.
Having the accounts not as ISA's means the interest is potentially taxable, but as explained above there are some allowances where you do not pay tax on more modest amounts of interest.
Non ISA's usually have a little bit better interest rate than the equivalent ISA.

so I know little to nothing about saving options. 

Time to learn. Reading through this forum and the main Savings forum can be quite informative. Also
Savings accounts: 3.4% easy access or up to 4.51% fixed (moneysavingexpert.com)