Where is Everyong Hiding Money?

TractorFactor

I don't understand this.
I've never really had enough cash in good bank accounts to have £1000 in interest but now HMRC have written to me to say they're going to tax me as I have gone over that threshold now.

I would say my savings are modist but maybe I have more than I think.
Most of my savings are in differnet accounts saving for different things, some very long term (10+ / 15+ years), others will be cashed out and used within the next 3 or 4 years.

But there are people with £20,000+ savings out there.
Are they really putting everything into ISAs every year?  I know the answer is "yes" but what about people who have more than that in pure cash?  And what happens if there's an emergency and you need the money tomorrow?  From what I see, there are lead times with moving money in to and out of ISA accounts?

And I see many / most ISA businesses charge people to use them.
So is it really the case that I can't have £40,000 sitting in a bank account at 2.5% (for example) doing nothing but waiting for me to spend it when I want to, without the tax man having a chunk or being charged to invest it?

I'm very new to this and still reading through the guides but helps if people explain it like I'm 5 sometimes.

MeteredOut

TractorFactor said:

I don't understand this.
I've never really had enough cash in good bank accounts to have £1000 in interest but now HMRC have written to me to say they're going to tax me as I have gone over that threshold now.

I would say my savings are modist but maybe I have more than I think.
Most of my savings are in differnet accounts saving for different things, some very long term (10+ / 15+ years), others will be cashed out and used within the next 3 or 4 years.

But there are people with £20,000+ savings out there.
Are they really putting everything into ISAs every year?  I know the answer is "yes" but what about people who have more than that in pure cash?  And what happens if there's an emergency and you need the money tomorrow?  From what I see, there are lead times with moving money in to and out of ISA accounts?

And I see many / most ISA businesses charge people to use them.
So is it really the case that I can't have £40,000 sitting in a bank account at 2.5% (for example) doing nothing but waiting for me to spend it when I want to, without the tax man having a chunk or being charged to invest it?

I'm very new to this and still reading through the guides but helps if people explain it like I'm 5 sometimes.

You have some outdated and downright wrong views on ISAs. Its not clear if you're referring to Cash ISAs, Stocks and Shares ISAs, or both.

You can transfer money from a flexible Cash ISA to a linked current account in seconds (depending on the provider). Do it standing at an ATM and you can have cash in your hand there and then.

And no-one should be paying any fees for a Cash ISA. Stock & Shares ISA, yes, but even then there are some account fee-free S&S ISA platforms.

If you have £40K in savings and are paying tax on that, you should instead put £20K into a flexible Cash ISA today, and another £20K in the 2026 tax year. There's lists of top interest rate ISAs on MSE, and also threads on the ISA board.

https://forums.moneysavingexpert.com/categories/isas-tax-free-savings

refluxer

If your interest is being taxed, then it sounds like you may benefit from having your savings in cash ISAs - fixed rates for money you don't need access to and easy access for money that you might need to access in the near future. Money you don't need access to for much longer periods (eg. 10+ years) could also be invested in a stocks and shares ISA for (potentially) better gains.

You can currently earn over 4% in the best easy access cash ISAs where the interest won't be taxed, which is obviously substantially better than having it earn 2.5% in an account where any interest above your PSA will be taxed.

Ensuring that the easy access cash ISA you choose is 'flexible' will allow you to withdraw money and replace it within the same tax year without it counting again towards your annual £20k ISA allowance.

friolento

You can make withdrawals from easy access cash ISAs just like you can do from other easy access savings accounts.

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

jimjames

It's also better to have savings generating good interest and paying tax than putting money under the bed and getting no interest at all.

refluxer

TractorFactor said:

And I see many / most ISA businesses charge people to use them.

As mentioned above, if you pick a regular cash ISA provider then there will be no charges. A cash ISA is just like a normal savings account, but one where you don't pay tax on the interest.

It's Stocks and Shares ISAs where you'll find charges.

Middle_of_the_Road

friolento said:

You can make withdrawals from easy access cash ISAs just like you can do from other easy access savings accounts.

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

True, but if it's not a flexible ISA you can't replace it if you've used your annual allowance.

OP, if you don't know the total amount of savings you have, how can you possibly know how much tax you could owe?

Emmia

TractorFactor said:

I don't understand this.
I've never really had enough cash in good bank accounts to have £1000 in interest but now HMRC have written to me to say they're going to tax me as I have gone over that threshold now.

I would say my savings are modist but maybe I have more than I think.
Most of my savings are in differnet accounts saving for different things, some very long term (10+ / 15+ years), others will be cashed out and used within the next 3 or 4 years.

But there are people with £20,000+ savings out there.
Are they really putting everything into ISAs every year?  I know the answer is "yes" but what about people who have more than that in pure cash?  And what happens if there's an emergency and you need the money tomorrow?  From what I see, there are lead times with moving money in to and out of ISA accounts?

And I see many / most ISA businesses charge people to use them.
So is it really the case that I can't have £40,000 sitting in a bank account at 2.5% (for example) doing nothing but waiting for me to spend it when I want to, without the tax man having a chunk or being charged to invest it?

I'm very new to this and still reading through the guides but helps if people explain it like I'm 5 sometimes.

Do you really need near instantaneous access to £40k?

I'd have thought a good chunk of that (£38k?) should be in something like an ISA (S&S if a long term pot) with a few £K held in a normal saver account.

InvesterJones

TractorFactor said:

I don't understand this.
I've never really had enough cash in good bank accounts to have £1000 in interest but now HMRC have written to me to say they're going to tax me as I have gone over that threshold now.

I would say my savings are modist but maybe I have more than I think.
Most of my savings are in differnet accounts saving for different things, some very long term (10+ / 15+ years), others will be cashed out and used within the next 3 or 4 years.

But there are people with £20,000+ savings out there.
Are they really putting everything into ISAs every year?  I know the answer is "yes" but what about people who have more than that in pure cash?  And what happens if there's an emergency and you need the money tomorrow?  From what I see, there are lead times with moving money in to and out of ISA accounts?

And I see many / most ISA businesses charge people to use them.
So is it really the case that I can't have £40,000 sitting in a bank account at 2.5% (for example) doing nothing but waiting for me to spend it when I want to, without the tax man having a chunk or being charged to invest it?

I'm very new to this and still reading through the guides but helps if people explain it like I'm 5 sometimes.

It's entirely up to you if you wish to chose an ISA that either has charges or isn't easy access. But if you want EA you can, and if you want to have no charges, you can. Another consideration for long term funds is pension.

Many people use the idea of having an emergency bucket which is easy to access, and then putting savings that aren't needed as quickly away in accounts which may have a lead time, but generate better returns. For long term (10+ years) then non-emergency funds could be put to use in investments, to reduce the chance of inflation eating away at the spending power.

Eco_Miser

Emmia said:

Do you really need near instantaneous access to £40k?

I'd have thought a good chunk of that (£38k?) should be in something like an ISA (S&S if a long term pot) with a few £K held in a normal saver account.

Not the OP, but I've needed near instantaneous access to £13k, and anyone thinking of buying a car for instance might want more. I regularly shift more than £2k around. Of course a flexible cash ISA would serve that purpose.

QrizB

TractorFactor said:

I've never really had enough cash in good bank accounts to have £1000 in interest but now HMRC have written to me to say they're going to tax me as I have gone over that threshold now.
I would say my savings are modist but maybe I have more than I think.

Tis might be a good time to add up how much you reslly have.

TractorFactor said:

But there are people with £20,000+ savings out there.

There ae people with ten times that much on this foum. Possibly one hundred times as much.

TractorFactor said:

Are they really putting everything into ISAs every year?

Yes.

TractorFactor said:

... but what about people who have more than that in pure cash?

£20000 is an annual limit, not a cap on yout total ISA value.

They could add £20000 into an ISA last year, another £20000 this year, another £20000 next year. Repeat every year and end up with hundreds of thousands in ISAs, sheltered from tax.

TractorFactor said:

And what happens if there's an emergency and you need the money tomorrow?

Many cash ISAs are instant access; you can get your money out the same day.

TractorFactor said:

And I see many / most ISA businesses charge people to use them.

As others have said, there's no charge for a cash ISA. Only investment ISAs / stocks and shares ISAs have fees, and even some of those are low cost.

TractorFactor said:

So is it really the case that I can't have £40,000 sitting in a bank account at 2.5% (for example) doing nothing but waiting for me to spend it when I want to, without the tax man having a chunk or being charged to invest it?

Yes, in a cash ISA. And a good number of those pay much better interest than 2.5%, so not only will you not pay tax but you'll earn more interest.

OP this is your third recent thread about ISAs; have you read the main MSE article about cash ISAs yet?

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