Fixed Isa or Fixed savings?

Sammyg

Hi 

I am still in need of advice, I now have about £17,000 to invest and was thinking of putting this in an isa, but whilst deciding on which Isa, it seems interest rates just don't look really great at the moment,  I found out though I am a basic tax payer, who knew, certainly not me!!, but looking at the Gov.uk website I found out I am, as my earnings are just around £18,000 per annum, I only work Part time, so as I understand it as a basic taxpayer, you can earn £1000 in interest, therefore I would like ask, as I can't ask anyone else, wouldn't it be more beneficial to put this amount in a higher interest rate fixed savings account?

I mean, the only other savings I have are in Isa's, one being a fixed and the other an easy isa, so I can access it quick at a moments notice.



  

masonic

Fixed term cash ISAs are not really fixed, because the ISA rules give individuals the right to access their ISA at any time. This means fixed ISA rates are generally lower than conventional fixes that do not permit access.

Unless you fear having too much in savings in the future to get it all into ISAs, then it would be reasonable to opt for a standard savings account paying a higher rate after any tax you would pay (which is none if your interest doesn't exceed £1000). If you are concerned about losing your ISA allowance, then you could use a flexible ISA and flexibly withdraw the money for most of the tax year to save it in higher paying standard accounts. Provided you return it for a few days between tax years it can spend most of its time in the higher paying accounts elsewhere without you losing the ability to return it to the ISA.

Sammyg

masonic said:

Fixed term cash ISAs are not really fixed, because the ISA rules give individuals the right to access their ISA at any time. This means fixed ISA rates are generally lower than conventional fixes that do not permit access.

Unless you fear having too much in savings in the future to get it all into ISAs, then it would be reasonable to opt for a standard savings account paying a higher rate after any tax you would pay (which is none if your interest doesn't exceed £1000). If you are concerned about losing your ISA allowance, then you could use a flexible ISA and flexibly withdraw the money for most of the tax year to save it in higher paying standard accounts. Provided you return it for a few days between tax years it can spend most of its time in the higher paying accounts elsewhere without you losing the ability to return it to the ISA.

Thank you for your reply masonic, tbh a higher interest rate savings account is more appealing to me, when looking at Isa rates

refluxer

Sammyg said:
tbh a higher interest rate savings account is more appealing to me, when looking at Isa rates

What types of accounts are you looking at ? If you're looking to lock your cash away, then there isn't much difference between some, similar ISA and non-ISA accounts.

For example - the current highest-paying 1 year fixed rate bond is 4.43% whereas the highest-paying ISA equivalent is 4.32% which equates to a difference of only £19 PA on £17k.

With that in mind, it's important to look at how much interest you're likely to earn in total across all your non-ISA savings accounts in the relevant tax year (2026-27 if you're looking at 1 year fixed rate accounts), as £17k in a 1 year (non-ISA) fixed rate bond at 4.43% will earn you £753 in interest, which is obviously a big chunk of your £1000 Personal Savings Allowance.

saajan_12

Sammyg said:

I mean, the only other savings I have are in Isa's, one being a fixed and the other an easy isa, so I can access it quick at a moments notice.

To check, was any of your ISA savings deposited in this tax year? If so, remember you'll be limited in how much you can add - total of up to 20k in a tax year. 

Sammyg said:

Hi 

I am still in need of advice, I now have about £17,000 to invest and was thinking of putting this in an isa, but whilst deciding on which Isa, it seems interest rates just don't look really great at the moment,  I found out though I am a basic tax payer, who knew, certainly not me!!, but looking at the Gov.uk website I found out I am, as my earnings are just around £18,000 per annum, I only work Part time, so as I understand it as a basic taxpayer, you can earn £1000 in interest, therefore I would like ask, as I can't ask anyone else, wouldn't it be more beneficial to put this amount in a higher interest rate fixed savings account?
  

Even at a high 5% interest rate, you'd be earning £875 a year on that, under the tax free savings allowance. So if I were you I'd certainly be going for the best rate even if non ISA. As your savings increase (either from the interest or if you save more from your other income) you can maybe move chunks of the savings into an ISA. I say maybe because it only makes sense if 
(i) the ISA rate is better than the normal savings rate net of tax, ie 80% of the normal rate. If ISA is much lower then better off paying the tax; or
(ii) you anticipate you'll want to put significant savings into ISAs in future and will be limited by the 20k limit. 

MEM62

Sammyg said:

I now have about £17,000 to invest and was thinking of putting this in an isa, but whilst deciding on which Isa, it seems interest rates just don't look really great at the moment,  
  

Just a small point.  You mention investing and then refer to interest rates.  Investments do not pay interest - investments are the purchase of equities which then grow (or shrink) with the market.  Savings pay interest. 

If you do not need the money for some years then investing some of it may actually be the way to go as the returns on equities are likely to beat cash in the long run.