Best deal? Monthly interest or daily?

boomish

We have an existing Marcus ISA & want to top it up with a this years 20k , bit confused on what’s the best deal, Yorkshire e-isa looks great with 4.25 up to 20k but it’s interest is paid a yearly, where as Marcus is paid monthly . We need it fairly flexible as we may move this year & need money to complete a house purchase, so only 6 times access per year is fine . 

On the Yorkshire ISA it’s not really clear, it’s says withdrawal is fine without loss of interest, so I presume if we did withdraw it after 6 months we still get the interest accrued to that date but it also says closure of the account would lose its tax free status, so we pay tax on the interest earned this year? 

Oh lastly I suppose it doesn’t matter if we top up our existing ISA then transfer or transfer then top up? 

Thanks in advance for any advice..

eskbanker

If you're comparing accounts based on interest earned, then the purpose of the standardised AER figure is to allow like for like evaluation, regardless of whether it's paid monthly or annually - the AER for a monthly-paid account is based on interest compounding so will be slightly higher than the monthly gross rate.

And yes, if you close an account that pays interest annually, the accrued interest is paid with the closing balance.  If you withdraw during the year but don't close the account, your interest would only be paid at the end of the year, but will take account of the higher balance earlier in the year, as it'll be calculated based on the balance each day.

When they say loss of tax-free status, that simply means that any income subsequently derived from the money after removal from the ISA wrapper is taxable, but what was earned while within the ISA isn't taxed.

And yes, no issue with paying in before or after transfer, as long as all current year money is kept together in the same account at all times.

boomish

eskbanker said:

If you're comparing accounts based on interest earned, then the purpose of the standardised AER figure is to allow like for like evaluation, regardless of whether it's paid monthly or annually - the AER for a monthly-paid account is based on interest compounding so will be slightly higher than the monthly gross rate.

And yes, if you close an account that pays interest annually, the accrued interest is paid with the closing balance.  If you withdraw during the year but don't close the account, your interest would only be paid at the end of the year, but will take account of the higher balance earlier in the year, as it'll be calculated based on the balance each day.

When they say loss of tax-free status, that simply means that any income subsequently derived from the money after removal from the ISA wrapper is taxable, but what was earned while within the ISA isn't taxed.

And yes, no issue with paying in before or after transfer, as long as all current year money is kept together in the same account at all times.

Thank you so much for the simple explanation that’s perfect, really appreciate the time taken 🙏👍👏