ISA savings account & tax

leg_falcon01

This question has probably been answers many times but I'm struggling to find the answer to it. I hope someone can help.

I need some help with understanding tax on savings as I think this will affect me in someway as I am reaching £20,000 worth of savings in a easy access ISA savings pot. My interest rate did go down from 4.07% AER to 3.82% AER. I am also part of the basic 20% rate taxpayer. 

• I want to know whether I should put my savings in a different savings pot?

• If I do go over the £20,000 threshold how do I go about not needing to pay tax on my ISA savings? or is it a legal requirement? 

Thank you for your help in advance. 

eskbanker

If your savings are in an ISA then they aren't taxable - that's the whole point of ISAs!

Edit: perhaps I misunderstood the situation - have you paid £20K into your ISA since 6 April?

molerat

The only threshold is how much new money you can pay into an ISA each year.  The interest earned within the ISA is not taxable even if you move the pot to an ordinary savings account but any interest then earned within that new account is liable to tax.

leg_falcon01

@molerat and @eskbanker thank you both for your help. 

@eskbanker to your question above no I haven't paid £20K in the ISA since 6 April. 

@molerat you mentioned about a threshold each year in the ISA. Does that depend on how much you have in the ISA or it's standard? 

eskbanker

You can pay up to £20K per tax year into ISAs (regardless of how much is already in them), so unless you're likely to breach that then there's no need to consider taxation.

leg_falcon01

@eskbanker thank you for the input. Sorry I'm asking too many questions. Are you aware of any good 4% plus ISA accounts out there that would be good for higher interest earned on my savings? 

eskbanker

leg_falcon01 said:

@eskbanker thank you for the input. Sorry I'm asking too many questions. Are you aware of any good 4% plus ISA accounts out there that would be good for higher interest earned on my savings? 

https://www.moneysavingexpert.com/savings/best-cash-isa/

Ayr_Rage

leg_falcon01 said:

@eskbanker thank you for the input. Sorry I'm asking too many questions. Are you aware of any good 4% plus ISA accounts out there that would be good for higher interest earned on my savings? 

3.82% is absolute pants!

You can get 5.17% with Trading 212, daily interest, instant access and flexible too.

leg_falcon01

@Ayr_Rage I know right. When I watched Martin's programme last night I was thinking why I'm I on such a low interest rate when there's Trading 212 which obviously is so much better. Thanks for your input. 

saajan_12

leg_falcon01 said:

This question has probably been answers many times but I'm struggling to find the answer to it. I hope someone can help.

I need some help with understanding tax on savings as I think this will affect me in someway as I am reaching £20,000 worth of savings in a easy access ISA savings pot. My interest rate did go down from 4.07% AER to 3.82% AER. I am also part of the basic 20% rate taxpayer. 

• I want to know whether I should put my savings in a different savings pot?

• If I do go over the £20,000 threshold how do I go about not needing to pay tax on my ISA savings? or is it a legal requirement? 

Thank you for your help in advance. 

The reasons to move would be if you can get 
* a higher ISA interest rate elsewhere
* a higher non-ISA interest rate -> If that better rate is in a non isa account, then you have to consider  the rate after tax and whether you're likely to pay any tax on it in the first place. As a basic rate payer you have a £1000 allowance anyway. The other consideration there's limits on how much money you can put back into ISAs later if you take it out now
* a LISA - if you're eligible and happy to not touch the money until buying your first house or retirement, then you'll get £1000 boost if you transfer 4k to a a lisa. 

Albermarle

leg_falcon01 said:

@Ayr_Rage I know right. When I watched Martin's programme last night I was thinking why I'm I on such a low interest rate when there's Trading 212 which obviously is so much better. Thanks for your input. 

This question has probably been answers many times but I'm struggling to find the answer to it. I hope someone can help. 

If you scroll through the forum, you will see lots of very similar questions and answers.
Also there are quite a few threads about T212.