ISA v Savings Account

Gareth77

I read some advice in one of the articles that states;

Take the rate on the ISA you're looking at and multiply it by:

- 1.25 if you're a basic-rate taxpayer
- 1.66 if you're higher-rate taxpayer
- 1.82 if you're a top-rate taxpayer

"The result of that sum is the rate you need to get on normal savings for it to be the winner vs the cash ISA equivalent. If normal savings don't pay more than that, then you're better off in the cash ISA."

So if I am a top-rate tax payer and have 40k savings ;

If I look at the 1 year fixed rate ISA from Lloyds - > 

https://www.lloydsbank.com/isas/1-year-fixed-rate-cash-isa.html. (4.95%)

It would be better to put the first 20K in the ISA rather than all of it in the defined access saver in Sainsburys? (4.01%)

https://www.sainsburysbank.co.uk/savings/defined-access-saver?CID=MSE_LST_202306#key-benefits

Thanks!

Catplan

4.95 is more than 4.01 before you multiply so I would be using that rate first yes.

where are the 40k savings just now as if it’s an isa you can transfer and keep the isa status.

top rate tax payer would need to get an account paying 9% to beat a 4.95 isa….. I think it’s got a 0.05 bonus for club Lloyds?

Bigwheels1111

Virgin money ISA 5.05% is better

Chip easy access at 4.21%.

Gareth77

Catplan said:

4.95 is more than 4.01 before you multiply so I would be using that rate first yes.

where are the 40k savings just now as if it’s an isa you can transfer and keep the isa status.

In a Natwest Instant Saver at 1.75 (have been for ages, I feel a bit of an idiot)

Catplan

Gareth77 said:

Catplan said:

4.95 is more than 4.01 before you multiply so I would be using that rate first yes.

where are the 40k savings just now as if it’s an isa you can transfer and keep the isa status.

In a Natwest Instant Saver at 1.75 (have been for ages, I feel a bit of an idiot)

At least you’re sorting it now, I would get some regular savers Nat west 6.17 and club Lloyds one is 6.25 and drip feed from an easy access account. I’m assuming you are already a Lloyds customer if looking at the isa.

boingy

As a higher rate tax payer you'll almost certainly be better off in an ISA than not. The important thing to remember about ISAs is they are tax free forever. This tax year you put 20K into a cash ISA and 20K into a non-ISA savings account. Next tax year you can put another 20K into the same ISA, or 20K into a different ISA or, and this is usually the best thing to do, 20K into a new ISA and *transfer* the first ISA into a new provider, assuming they have a better rate (they will!). An ISA transfer retains the tax free status so in the second year you have 40K earning tax free interest. 

Gareth77

Catplan said:

Gareth77 said:

Catplan said:

4.95 is more than 4.01 before you multiply so I would be using that rate first yes.

where are the 40k savings just now as if it’s an isa you can transfer and keep the isa status.

In a Natwest Instant Saver at 1.75 (have been for ages, I feel a bit of an idiot)

At least you’re sorting it now, I would get some regular savers Nat west 6.17 and club Lloyds one is 6.25 and drip feed from an easy access account. I’m assuming you are already a Lloyds customer if looking at the isa.

Hi actually no I'm not with Lloyds

Infact I've just been looking and I think Virgin ISA is better value for 1 year fixed -> 

https://uk.virginmoney.com/savings/find/results/online