# Isa or Fixed rate saving??

Forumite Posts: 2
Newbie
Any help appreciated, I m a bit confused around the taxation. I m a normal rate tax payer. I have 40’000 to either put in an isa or fixed 12 month saving. The fixed saving has a better interest rate of 6% compared to 5.5 on the isa. However will I pay more tax on the fixed rate?? Many thanks

• Forumite Posts: 77
Forumite
You multiply the 5.5% by 1.25 which gives you 6.78% so the ISA is better. However you can only put £20,000 in that.
• Forumite Posts: 327
Forumite
20k in the isa 20k in the fixed saver.

You'll pay £40 in tax in the year on the fixed saver but no way around that unless you want to take a gamble with premium bonds, but you'll need to be very very lucky to beat the interest on the fixed saver even after tax.

Massive thank you to those on the long since defunct Matched Betting board.
• Forumite Posts: 10,944
Forumite
Any help appreciated, I m a bit confused around the taxation. I m a normal rate tax payer. I have 40’000 to either put in an isa or fixed 12 month saving. The fixed saving has a better interest rate of 6% compared to 5.5 on the isa. However will I pay more tax on the fixed rate?? Many thanks
£40k @ 6% will generate £2400 in the year. Assuming you have no other savings interest, the tax due on that will be (£2400 - £1000 = £1400 @ 20% £280 so £2120 net
You can only put £20k in an ISA each tax year. £20k @ 5.5% = £1100.
If you put the other £20k in the FR @ 6%, interest will be £1200 less tax due (£200 @ 20%) £40 = £1160. So £2260 total.
Hope my maths hasn’t let me down. Some 🍷 🍷 has been consumed😊

• Forumite Posts: 2,285
Forumite
Any help appreciated, I m a bit confused around the taxation. I m a normal rate tax payer. I have 40’000 to either put in an isa or fixed 12 month saving. The fixed saving has a better interest rate of 6% compared to 5.5 on the isa. However will I pay more tax on the fixed rate?? Many thanks
That depends what you mean by a normal rate tax payer, I class myself as one of them but I only pay tax on a small portion of my income

I'm investing in savings too but not yet in an isa because I won't be taxed on my fixed savings interest

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