Savings account/ISA tax paid on interest

Marccon

Retired two years ago and invested part of my lump sum into a high interest savings account. I have just got my tax calulation in and got hit for £230 tax due to the interest paid on the saving account.

So thinking of investing it the T212 cash ISA account. I know I'm omly allowed £20k investment per year. I'm I best to only transfer £20k this year and £20k each year or transfer the lot in one go?

Or is there something better I can do to maximise my saving potenial and minimise the tax paid?

Dazed_and_C0nfused

Marccon said:

Retired two years ago and invested part of my lump sum into a high interest savings account. I have just got my tax calulation in and got hit for £230 tax due to the interest paid on the saving account.

So thinking of investing it the T212 cash ISA account. I know I'm omly allowed £20k investment per year. I'm I best to only transfer £20k this year and £20k each year or transfer the lot in one go?

Or is there something better I can do to maximise my saving potenial and minimise the tax paid?

Seems an usual way of thinking.

Most people want to get the best net return, minimising tax isn't the primary focus.

But if the cash ISA is going to beat the normal account once any tax liability is factored in then that seems a viable option.

But you can only add £20k in new money info a cash ISA each tax year.

Albermarle

You are not allowed to add more than £20K a year to an ISA. so you will need to do it each tax year.
Or you could add £20K into the T212 ISA this year and have a different ISA next year.
There is a sub forum for ISA's and you would probably benefit from having a look through it.
ISAs & tax-free savings — MoneySavingExpert Forum

masonic

You have no option to add more than £20k this tax year.

Premium bonds are a tax free alternative to a normal savings account, but the return depends on how lucky you are. Someone with average luck and who pays basic rate tax would likely be better off in the best savings accounts if they chase the best rates. Higher rate taxpayers are better suited to PB holdings.

You could save into an account paying interest annually at anniversary if you wished to defer interest until the next tax year. This would reduce your total this year and you could reduce it next year by adding another £20k to an ISA.

eskbanker

Dazed_and_C0nfused said:

Marccon said:

Retired two years ago and invested part of my lump sum into a high interest savings account. I have just got my tax calulation in and got hit for £230 tax due to the interest paid on the saving account.

So thinking of investing it the T212 cash ISA account. I know I'm omly allowed £20k investment per year. I'm I best to only transfer £20k this year and £20k each year or transfer the lot in one go?

Or is there something better I can do to maximise my saving potenial and minimise the tax paid?

Seems an usual way of thinking.

Most people want to get the best net return, minimising tax isn't the primary focus.

Did you mean 'an unusual way of thinking'?  You're obviously right that maximising net return is generally better, but many posters do indeed start from a perspective of wanting to minimise tax, so that could be argued to be fairly commonplace!