Did I make a mistake? ISA & Fixed 1Yr Saving Account

cagedanimal73

Hello, newbie here just after a bit of advice or confirmation please.

I had £50k saved in a Regular savings account for year and it paid £600 interest in October. I then put £20k into an ISA @ 4.2% and £20k into a 1Yr Fixed Term Savings Account @ 4.5% and left £10k in my regular savings account at 1%.

I am Basic tax rate rate payer and this is my first delve into any type of savings schemes.

My plan was as follows:

Cash ISA - returns £840 - tax free  - maturity November 2026
Fixed SA - returns £900 - also tax free using PSA - maturity October 2026

However, I think I have made a mistake in forgetting that the tax year is April to April. So my question is simple - does the interest earnt in my Fixed SA from October to April get added to the £600 I have already received from my Regular SA for this 24/25 tax year?

I did think I could withdraw from my ISA to lower its balance to negate any hit from tax as I am still in the 14-day window but quickly realised the ISA is not subject to tax so there's no point. Not so lucky on the Fixed SA as that is now locked in with penalties to withdraw..

I think I made a rookie mistake! Could anyone please advise what I should do next?

Thanks in advance.

luci

cagedanimal73 said:

Hello, newbie here just after a bit of advice or confirmation please.

I had £50k saved in a Regular savings account for year and it paid £600 interest in October. I then put £20k into an ISA @ 4.2% and £20k into a 1Yr Fixed Term Savings Account @ 4.5% and left £10k in my regular savings account at 1%.

I am Basic tax rate rate payer and this is my first delve into any type of savings schemes.

My plan was as follows:

Cash ISA - returns £840 - tax free  - maturity November 2026
Fixed SA - returns £900 - also tax free using PSA - maturity October 2026

However, I think I have made a mistake in forgetting that the tax year is April to April. So my question is simple - does the interest earnt in my Fixed SA from October to April get added to the £600 I have already received from my Regular SA for this 24/25 tax year?

I did think I could withdraw from my ISA to lower its balance to negate any hit from tax as I am still in the 14-day window but quickly realised the ISA is not subject to tax so there's no point. Not so lucky on the Fixed SA as that is now locked in with penalties to withdraw..

I think I made a rookie mistake! Could anyone please advise what I should do next?

Thanks in advance.

You can only put £20000 in total into an ISA between 6th April and 5th April in any year.

refluxer

cagedanimal73 said:

So my question is simple - does the interest earnt in my Fixed SA from October to April get added to the £600 I have already received from my Regular SA for this 24/25 tax year?

Does the fixed rate savings account pay interest monthly or annually/at maturity ?

If it's the latter, then the interest from that will fall into the next tax year (2026-27) as that's when it'll be credited.

If it's the former, then the provider will report the interest earned up to and including the 5th April to HMRC as being received in the current tax year and HMRC will treat it accordingly, however... avoiding to the rules, interest earned on that type of account should be included in any tax calculations in the tax year in which it is accessible (the next tax year in your case) so you could, if you wanted, provide proof to HMRC that it is not actually accessible in the current tax year and they should include it in the next tax year's calculations.

Incidentally - it's better to call the originating account an Easy access (EA) savings account in this forum if that's what it is, as a 'Regular Savings' account is a different type of account (one in which deposits are paid in monthly and limited).

Ch1ll1Phlakes

cagedanimal73 said:

However, I think I have made a mistake in forgetting that the tax year is April to April. So my question is simple - does the interest earnt in my Fixed SA from October to April get added to the £600 I have already received from my Regular SA for this 24/25 tax year?

It depends if your interest is paid monthly or annually, though based on discussion on the forum recently HMRC are poor at managing the differences between the two.

If it's paid monthly you be getting roughly £900/12 or £75 pm in interest and based on the fact you opening the account in October there would be five months of interest, or £375 in total. This combined with your £600 interest from your other account would NOT take you over the PSA

If it was six months interest you would get £450 in interest or £1050 in total across taxable accounts, i.e you would be over the PSA by £50. Note, you may still not be taxed on this dependent on your pay. Is you income less than £17570? If so, the starter savings rate may apply (see here for details How the starting rate for savings works - Money Saving Expert). For example, if you only earned up to £17520 this last £50 would all be tax-free.

If you interest is paid annually, for example at maturity, the interest will be paid in one lump sum in the next tax-year. You will have a PSA for the next tax-year so the interest earned from your Fixed SA should still earn interest under the allowance, i.e. £900<£1000. Though you would again be getting interest from your regular savings (unless this was moved to an ISA) which may again push you over the PSA next tax year.

Keep in mind it's often better to earn higher interest and pay tax on it than take a lower rate just to avoid tax. It the six payments monthly example above, if your £50 interest was to be taxed as you had income above the £17570 mark you would only be due to pay 20% of £50 or £10 in tax. You could have taken a lower interest rate and earned £800 in interest but you would be still better off with the higher interest rate as after tax you would have £890 (£900 -£10 in tax).

You ask what you should do next. Most people in your situation would do very little as you may have small tax bill on your savings but not enough to be worth changing anything. Your options to try an negate a tax bill next year is to either move your regular savings to Premium Bonds or move them into an ISA when the new tax-year starts.

Kim_13

The £600 interest you received in October uses your PSA for 2025/2026, of which you now have £400 remaining. £600 on £50,000 is poor and would likely have been beaten by Premium Bonds which are also tax free. 

The 4.5% taxable 1 Year Fixed Bond will take 90% of 2026/2027’s PSA; as it is a 1 year bond, the most likely scenario is that there is one interest payment on the anniversary of the date it was opened. When it matures, you want to avoid any account paying interest monthly so that interest earned between October 2026 and April 2027 is taxable in 2027/2028 instead. If you usually get the Nationwide Fairer Share payment and they do one for 2026, that would use the remaining £100 of your 26/27 PSA as they report it as interest.

I would not have put as much as £20,000 in a taxable Fixed Rate Bond (that’s where money would need to come out from if you want more PSA remaining for 26/27) but as it’s done now with no way out, focus on making sure your taxable income for 2026/2027 does not go into the higher rate band, salary sacrificing extra into a pension if necessary in order to do this. If it goes over even by 1p, PSA becomes £500 and will not be enough to cover the fixed rate bond. Your taxable income will include the £900 taxable interest from the fixed rate bond, but exclude any interest earned by an ISA. 

Withdrawing from an ISA will not negate a tax hit, as it’s a tax free product. Given the Cash ISA limit is likely to be lower next tax year, I would leave that where it is. It’s a decent rate at the current time.

Use Regular Savers to improve the return on the £10,000 you have available: https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/ . If you choose accounts that allow early closure, you could then close them in early April to utilise the £400 PSA remaining for 2025/2026 and then place it into a Flexible Easy Access ISA once a new ISA allowance is available on April 6. Getting a flexible product means you can withdraw from it and replace the amount withdrawn without it affecting your allowance, meaning the money stays tax free. 

cagedanimal73

refluxer said:

cagedanimal73 said:

So my question is simple - does the interest earnt in my Fixed SA from October to April get added to the £600 I have already received from my Regular SA for this 24/25 tax year?

Does the fixed rate savings account pay interest monthly or annually/at maturity ?

If it's the latter, then the interest from that will fall into the next tax year (2026-27) as that's when it'll be credited.

If it's the former, then the provider will report the interest earned up to and including the 5th April to HMRC as being received in the current tax year and HMRC will treat it accordingly, however... avoiding to the rules, interest earned on that type of account should be included in any tax calculations in the tax year in which it is accessible (the next tax year in your case) so you could, if you wanted, provide proof to HMRC that it is not actually accessible in the current tax year and they should include it in the next tax year's calculations.

Incidentally - it's better to call the originating account an Easy access (EA) savings account in this forum if that's what it is, as a 'Regular Savings' account is a different type of account (one in which deposits are paid in monthly and limited).

Thank you for responding.

Yes it pays at the end of the term - so November 2026 - so that should fall into the 26/27 tax year, correct?

And yes sorry - poor/incorrect terminology used - it's not a Regular but an Instant Access account

(proper noob here as you can probably tell!)

luci

cagedanimal73 said:

refluxer said:

cagedanimal73 said:

So my question is simple - does the interest earnt in my Fixed SA from October to April get added to the £600 I have already received from my Regular SA for this 24/25 tax year?

Does the fixed rate savings account pay interest monthly or annually/at maturity ?

If it's the latter, then the interest from that will fall into the next tax year (2026-27) as that's when it'll be credited.

If it's the former, then the provider will report the interest earned up to and including the 5th April to HMRC as being received in the current tax year and HMRC will treat it accordingly, however... avoiding to the rules, interest earned on that type of account should be included in any tax calculations in the tax year in which it is accessible (the next tax year in your case) so you could, if you wanted, provide proof to HMRC that it is not actually accessible in the current tax year and they should include it in the next tax year's calculations.

Incidentally - it's better to call the originating account an Easy access (EA) savings account in this forum if that's what it is, as a 'Regular Savings' account is a different type of account (one in which deposits are paid in monthly and limited).

Thank you for responding.

Yes it pays at the end of the term - so November 2026 - so that should fall into the 26/27 tax year, correct?

And yes sorry - poor/incorrect terminology used - it's not a Regular but an Instant Access account

(proper noob here as you can probably tell!)

Don't worry about being a noob and getting the terminology wrong. There's a lot to learn as you're finding out, but you have asked a question and you'll be a lot better informed from the replies here. Remember, most of the people who post on here got their knowledge from here. No-one is born knowing anything.

refluxer

cagedanimal73 said:

refluxer said:

cagedanimal73 said:

So my question is simple - does the interest earnt in my Fixed SA from October to April get added to the £600 I have already received from my Regular SA for this 24/25 tax year?

Does the fixed rate savings account pay interest monthly or annually/at maturity ?

If it's the latter, then the interest from that will fall into the next tax year (2026-27) as that's when it'll be credited.

If it's the former, then the provider will report the interest earned up to and including the 5th April to HMRC as being received in the current tax year and HMRC will treat it accordingly, however... avoiding to the rules, interest earned on that type of account should be included in any tax calculations in the tax year in which it is accessible (the next tax year in your case) so you could, if you wanted, provide proof to HMRC that it is not actually accessible in the current tax year and they should include it in the next tax year's calculations.

Incidentally - it's better to call the originating account an Easy access (EA) savings account in this forum if that's what it is, as a 'Regular Savings' account is a different type of account (one in which deposits are paid in monthly and limited).

Thank you for responding.

Yes it pays at the end of the term - so November 2026 - so that should fall into the 26/27 tax year, correct?

And yes sorry - poor/incorrect terminology used - it's not a Regular but an Instant Access account

(proper noob here as you can probably tell!)

Yes, interest paid (credited) in November 2026 will fall under the 2026-27 tax year's PSA.

Note that some fixed rate savings account providers might show you the interest earned so far (sometimes even on a daily basis), but that's just for your information - it's the date (or dates) that the interest is actually credited to the account (and whether it's accessible) that matters. 

No worries about the terminology - regular does indeed also mean normal so you weren't wrong to use it. I only mentioned it because Regular (often with a capital R) Savings accounts are much discussed on the forum and so avoiding using that term when talking about easy access accounts can help tp avoid confusion

Now you've started making your savings work for you a little more, you could also move that Easy Access cash to an account where it'll earn you a better rate of interest. Either by utilising Regular Savings accounts or by shifting it to a higher-paying Easy Access account - eg. a Zopa Smart Saver Access pot at 4.75% (you need to open their current account and pay in £500 a month to get that rate).

If you were simply wanted to get the best return from the easy access savings then I would probably avoid putting £10k into Premium Bonds because, as you can see from this link, someone with average luck would only expect to win £275 PA on that amount which equates to 2.75%, so the chances are that you'd be better off paying tax at 20% on Zopa's 4.75% EA account (as a best worst-case scenario !) than putting £10k into Premium Bonds.

penners324

Why have you left £10k in an account only earning 1%?

Get it moved to an account earning 4%+

penners324

Plus do you really need that much in cash holdings?

Put a chunk of it into a pension and / or S&S ISA is likely to be a better long term plan 

friolento

Now you've started making your savings work for you a little more, you could also move that Easy Access cash to an account where it'll earn you a better rate of interest. Either by utilising Regular Savings accounts or by shifting it to a higher-paying Easy Access account - eg. a Zopa Smart Saver Access pot at 4.75% (you need to open their current account and pay in £500 a month to get that rate).
 

The £500 needs to go into the Zopa current account and can be withdrawn immediately after arriving there. It must come from a non-Zopa account - so you can just shuttle £500between your normal current account and the Zopa current. Or you could withdraw £500 from your Zopa saver to your non-Zopa current account, then send it from there to the Zopa current account, and then transfer it back into the Zopa saver. 

Need to do this once a month, where 'month' starts on the same day your Zopa 4.75% account started, not necessarily a calendar month.