Taking out Cash ISA money from Trading 212 account to Easy Access savings advice

20122013

If I withdraw from my Coventry (Flexi) 6 Access ISA (Online)  3.93% and deposit the money into a savings account which pays 5%, will I have to pay tax on this interest as I think I would have maxed out on the Personal Allowance etc? 

slinger2

Depends on what sort of savings account you're opening. If it's an ISA then you'll be using up some of your annual allowance. If you go over the £20k limit the tax man will eventually notice. If its not an ISA any interest you get is potentially taxable. If you're a basic rate tax paper you can get £1,000 in interest each tax year before paying tax. Anything over that will be taxed at 20% (probably by reducing your tax code)

20122013

slinger2 said:

Depends on what sort of savings account you're opening. If it's an ISA then you'll be using up some of your annual allowance. If you go over the £20k limit the tax man will eventually notice. If its not an ISA any interest you get is potentially taxable. If you're a basic rate tax paper you can get £1,000 in interest each tax year before paying tax. Anything over that will be taxed at 20% (probably by reducing your tax code)

It will be a taxable saving account but with a higher interest rate. 

May I check my sums?

For easier calculation, say I have £10,000 in the cash ISA :

Savings for 1 year

£10000 x 1.07% (5% - 3.93% interest)  will earn £107.53 per tax

Tax to pay, will be £107.53 x 20%  = £21.506

I would be £86.024 better off if I move the £10000 to the 5% savings account? and move it back to the Cash ISA before 5 April 2026?

Eco_Miser

20122013 said:

slinger2 said:

Depends on what sort of savings account you're opening. If it's an ISA then you'll be using up some of your annual allowance. If you go over the £20k limit the tax man will eventually notice. If its not an ISA any interest you get is potentially taxable. If you're a basic rate tax paper you can get £1,000 in interest each tax year before paying tax. Anything over that will be taxed at 20% (probably by reducing your tax code)

It will be a taxable saving account but with a higher interest rate. 

May I check my sums?

For easier calculation, say I have £10,000 in the cash ISA :

Savings for 1 year

£10000 x 1.07% (5% - 3.93% interest)  will earn £107.53 per tax

Tax to pay, will be £107.53 x 20%  = £21.506

I would be £86.024 better off if I move the £10000 to the 5% savings account? and move it back to the Cash ISA before 5 April 2026?

If I've understood you correctly, you're wrong.

Taxable account:

£10000 x 5% will earn £500 gross. Tax will be £100, leaving £400 nett, assuming it is all taxed at 20%

ISA account:

£10000 x 3.93% will earn £393 gross. No tax to pay, leaving £393 nett, 

You would be £7 better off if you move the £10000 to the 5% savings account. Probably not worth the effort.

Actually that's wrong too, those figures are for a full year, you can't get a full year in the 5% account AND use the flexibility of the ISA to keep future interest non-taxable.

slinger2

20122013 said:

slinger2 said:

Depends on what sort of savings account you're opening. If it's an ISA then you'll be using up some of your annual allowance. If you go over the £20k limit the tax man will eventually notice. If its not an ISA any interest you get is potentially taxable. If you're a basic rate tax paper you can get £1,000 in interest each tax year before paying tax. Anything over that will be taxed at 20% (probably by reducing your tax code)

It will be a taxable saving account but with a higher interest rate. 

May I check my sums?

For easier calculation, say I have £10,000 in the cash ISA :

Savings for 1 year

£10000 x 1.07% (5% - 3.93% interest)  will earn £107.53 per tax

Tax to pay, will be £107.53 x 20%  = £21.506

I would be £86.024 better off if I move the £10000 to the 5% savings account? and move it back to the Cash ISA before 5 April 2026?

You say "£10000 x 1.07% (5% - 3.93% interest)  will earn £107.53 per tax" but that's clearly wrong, as noted above. Potentially taxable interest would be £500 (£10000 at 5%).

If that's your only interest you'll probably not pay tax on it (depends on your income).

All sounds overly complex to me. Why not simply transfer the ISA to a higher paying ISA?

clairec666

Eco_Miser's calculations are correct. If you're already earning enough interest elsewhere to be taxed, and assuming you're on the 20% rate.

Simple calculation - take the rate of a taxable savings account, reduce it by 20%, and compare this to the rate in the ISA. In this case, your 5% non-ISA (4% after tax) would give you marginally more than your 3.93% ISA, but there are better ISAs out there.

20122013

slinger2 said:

All sounds overly complex to me. Why not simply transfer the ISA to a higher paying ISA?

Update:  I have found a Flexi Cash ISA 4.2% (according to my calculation (Cough) that will get approximately the same net interest as the non ISA account.  However, this 4.2% has some bad reviews with accessing the funds so will start my search again.