Savings

Poormum

Hi, 
I’m a savings newbie and I made a bit of a mistake with my saving plan for the year. I opened an isa with Nationwide back in April with the intention to start adding to it a couple of months later to start increasing savings and avoiding interest tax…. 

I went to pay into in yesterday and found that it was a one year fixed lump sum isa that I could only pay into once…. Obviously my mistake but what are my options now? 

I currently have about £10k across several accounts to benefit from different interest rates. I’m likely to start saving £500 a month so will likely go over the interest tax allowance. I earn 38.5k so am in the £500 interest category. I do have a s&s isa with vanguard I opened last year but not currently actively investing. Could I just transfer the cash into that account without investing it and it will be free from tax?? 

sheslookinhot

Are you sure about £500 interest category ? I thought that was for high rate tax payers only.

Poormum

Yes, here it says £37.7k I think it’s different for interest on savings than it is on earnings. 

https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past#tax-rates-and-bands

sheslookinhot

Ok, unless you are a higher rate tax payer you can earn up to £1000 interest without paying tax.

ColdIron

Poormum said:

Yes, here it says £37.7k I think it’s different for interest on savings than it is on earnings. 

https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past#tax-rates-and-bands

It's £37,700 of taxable income

• Tax is paid on the amount of taxable income remaining after the Personal Allowance has been deducted.

Higher rate tax starts at £50,270. I.e. £12,570 (Personal Allowance) + £37,700 (taxable income at Basic Rate)

So the £1,000 Personal Savings Allowance applies to you

Eco_Miser

Poormum said:

Hi, 
I’m a savings newbie and I made a bit of a mistake with my saving plan for the year. I opened an isa with Nationwide back in April with the intention to start adding to it a couple of months later to start increasing savings and avoiding interest tax…. 

I went to pay into in yesterday and found that it was a one year fixed lump sum isa that I could only pay into once…. Obviously my mistake but what are my options now? 

Since it's Nationwide, you can open another cash ISA, if you want to after reading the other replies. Nationwide consider all their cash ISAs to be one ISA . https://www.nationwide.co.uk/savings/help/isas-explained/#how-many-is-as-can-you-have

Dazed_and_C0nfused

Poormum said:

Yes, here it says £37.7k I think it’s different for interest on savings than it is on earnings. 

https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past#tax-rates-and-bands

That is the basic rate band.

That applies after the Personal Allowance of £12,570 (assuming you haven't applied for Marriage Allowance) so you have to have taxable income over £50k before you become a higher rate payer.

With earnings of £38.5k and a bit of interest you won't be a higher rate payer and as such the first £1,000 of non ISA  taxable interest will be taxed at 0%.

Poormum

ColdIron said:

Poormum said:

Yes, here it says £37.7k I think it’s different for interest on savings than it is on earnings. 

https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past#tax-rates-and-bands

It's £37,700 of taxable income

• Tax is paid on the amount of taxable income remaining after the Personal Allowance has been deducted.

Higher rate tax starts at £50,270. I.e. £12,570 (Personal Allowance) + £37,700 (taxable income at Basic Rate)

So the £1,000 Personal Savings Allowance applies to you

That makes sense.. I’d always wondered why it was a lower rate but assumed it was to get more tax 🤦‍♀️ thank you I’ll take advantage of chips new rate then!

Poormum

Eco_Miser said:

Poormum said:

Hi, 
I’m a savings newbie and I made a bit of a mistake with my saving plan for the year. I opened an isa with Nationwide back in April with the intention to start adding to it a couple of months later to start increasing savings and avoiding interest tax…. 

I went to pay into in yesterday and found that it was a one year fixed lump sum isa that I could only pay into once…. Obviously my mistake but what are my options now? 

Since it's Nationwide, you can open another cash ISA, if you want to after reading the other replies. Nationwide consider all their cash ISAs to be one ISA . https://www.nationwide.co.uk/savings/help/isas-explained/#how-many-is-as-can-you-have

Amazing! Thank you for that as I assumed I couldn’t open another now! I’ll have a look at the rates on their other ISA’s! ☺️

grumbler

Poormum said:

Hi, 
I’m a savings newbie and I made a bit of a mistake with my saving plan for the year. I opened an isa with Nationwide back in April with the intention to start adding to it a couple of months later to start increasing savings and avoiding interest tax…. 

I went to pay into in yesterday and found that it was a one year fixed lump sum isa that I could only pay into once…. Obviously my mistake but what are my options now?

How much have you deposited into it? You can switch it with a small loss (depending on the balance) -

MSE: Already have a fixed-rate ISA? Rates have shot up recently, and, since ISAs let you withdraw early for an interest penalty, it may be better to switch. Use our ISA switching calc to check.

I do have a s&s isa with vanguard I opened last year but not currently actively investing. Could I just transfer the cash into that account without investing it and it will be free from tax??

Yes - within the total annual ISA allowance (£20K).

Sg28

With your money in Chip at 4.51% you won't pay tax until your savings exceed £22172. So for now there is no need to worry about the ISA.