Isa or Fixed rate saving??

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 

Comments

  • Zopa_Trooper
    Zopa_Trooper Forumite Posts: 77
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    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.
  • Sg28
    Sg28 Forumite Posts: 327
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    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. 
    Ex Sg27 (long forgotten log in details)

    Massive thank you to those on the long since defunct Matched Betting board.
  • badger09
    badger09 Forumite Posts: 10,944
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    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. 
    Seems like your best option. 
    Hope my maths hasn’t let me down. Some 🍷 🍷 has been consumed😊

  • MikeJXE
    MikeJXE Forumite Posts: 2,285
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    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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