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Starter tax allowance v cash isa
meat_n2_reg
Posts: 320 Forumite
Hello
I have dropped my hours at work and now only earn approx 12.5k per year
I have approx 50k in cash ISAs as previously earned a lot more
From what I understand I can now earn £5000 in interest tax free on top of the tax allowance ?
Therefore as I can get better interest rates on fixed saver than cash isa I would be better off putting savings into a non cash isa ?
Just checking if this is correct any advice welcome
Thanks
I have dropped my hours at work and now only earn approx 12.5k per year
I have approx 50k in cash ISAs as previously earned a lot more
From what I understand I can now earn £5000 in interest tax free on top of the tax allowance ?
Therefore as I can get better interest rates on fixed saver than cash isa I would be better off putting savings into a non cash isa ?
Just checking if this is correct any advice welcome
Thanks
0
Comments
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As well as the £5K starting savings rate, you still get the £1000 personal interest allowance as well, so £6K.meat_n2_reg said:Hello
I have dropped my hours at work and now only earn approx 12.5k per year
I have approx 50k in cash ISAs as previously earned a lot more
From what I understand I can now earn £5000 in interest tax free on top of the tax allowance ?
Therefore as I can get better interest rates on fixed saver than cash isa I would be better off putting savings into a non cash isa ?
Just checking if this is correct any advice welcome
Thanks
So you are correct in looking at whether you really need to stick with ISA's However some points to ponder.
You can never be sure what the future brings so maybe better not to give up on ISA's altogether .
Interest rates are not that different between equivalent ISA's and non ISA savings accounts, unlike in the past. For example the difference for the best one year fixed rate is 5.25% compared to 5.05% for the same as an ISA.1 -
If your only non-savings income is about the same as your personal tax allowance then you can earn up to £6K in savings interest without paying tax (£5K starter rate and £1K personal savings allowance).
So if you can get better rates outside of ISAs then yes, you'd earn more in the short term, at the (potential) expense of not having those funds wrapped within the ISA shelter in future should the situation change.1 -
Instant access ISAs aren't much different to non ISA instant access in terms of interest rates.
Also. Fixed rate ISAs do allow access (subject to a penalty, but non ISA fixed rates generally don't allow access at all for the term.
1
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