ISA or Savings account

Cookiepops

I'm with Nationwide and have an ISA that's 3.75% gross interest. But I can open a limited access savings account that's 8% aer/gross. I'm a 40% tax payer so I don't know whether I'm better off with the ISA or look to move my savings?
Thanks

wmb194

Cookiepops said:

I'm with Nationwide. I have 20k in an ISA that's 3.75% gross interest. But I can open a limited access savings account that's 8% aer/gross. I'm a 40% tax payer so I don't know whether I'm better off with the ISA or look to move my savings?
Thanks

That 8% account only allows deposits of £200pm so you could do both. Net of 40% tax at the margin 8% gross is worth 4.8% net. I'd think about looking for a better Isa.

https://www.nationwide.co.uk/savings/flex-regular-saver/

Wheres_My_Cashback

ISA 5.05%

https://www.coventrybuildingsociety.co.uk/member/product/savings/limited_access/four-access-isa-online.html

Albermarle

Cookiepops said:

I'm with Nationwide. I have 20k in an ISA that's 3.75% gross interest. But I can open a limited access savings account that's 8% aer/gross. I'm a 40% tax payer so I don't know whether I'm better off with the ISA or look to move my savings?
Thanks

If you can fix ( have no access ) for a year, Nationwide are offering 5.5% with a cash ISA.

DigSunPap

Given your tax rate, it's important to consider the implications. The ISA provides tax-free interest, making the 3.75% interest more attractive after taxes. But on the other hand, the 8% AER/gross savings account may have taxable interest, significantly reducing your after-tax return.

If you prioritise tax efficiency and don't require immediate access to your funds, I'd say that the ISA is the better choice, as it provides a competitive after-tax return. However, it's essential to confirm the tax treatment of the savings account and assess your need for access before making a decision.