ISA or Easy Access

Rob_SP

Can someone advise.  My partner is looking to invest around £60k until we find the correct house for a relocation (hopefully over the next 12 months).  He currently doesn't have either an ISA or a savings account, just a current account.  He is a tax payer.  Is it worth opening an ISA AND a savings account given the short amount of time it may be invested?  Thanks

eskbanker

The annual contribution limit for ISAs is £20K, so it won't all go into an ISA anyway, but there isn't really enough to go on there to give a definitive answer - the best approach is generally to maximise net return, which may or may not involve using an ISA, depending on tax rate, other savings, etc.

masonic

Having £40k outside of an ISA will likely consume any tax free personal savings allowance within the 6 months remaining of this tax year. He would need to do the sums, comparing ISA and normal savings rates on £20k for the estimated period he is likely to save, to see if any tax saving would outweigh the likely reduced interest rate on an ISA. After the first 6 months, he could have £40k in an ISA, but nobody knows where rates would be at that stage. It would be something to re-evaluate towards the end of this tax year, as the whole £40k could be deposited during March-April.

Doctor_Who

Rob_SP said:

Can someone advise.  My partner is looking to invest around £60k until we find the correct house for a relocation (hopefully over the next 12 months).  He currently doesn't have either an ISA or a savings account, just a current account.  He is a tax payer.  Is it worth opening an ISA AND a savings account given the short amount of time it may be invested?  Thanks

At ~5% the interest will be ~£1500 in 6 months. If it's outside an ISA, then £1000 interest may be covered by the PSA (depends on tax band, other savings interest etc), so some tax will be payable. Better that than zero interest earned in a current account.

Albermarle

Best Easy Access Savings Accounts | Up To 5.00% (moneyfactscompare.co.uk)
Easy Access Cash ISAs | Rates Up To 4.80% (moneyfactscompare.co.uk)