ISA v Savings

gerdo

Hello all,

I have an ISA with 20K in it and the year bonus is ending and the new rate is pants. I was looking at moving it and the best transfer rate I can get is 3.6% (so yearly interest is £720).

I can open a new savings account at a rate of 4.5% which will generate £900 interest. When I pay tax on that I will be left with £720 also.

So am I missing something? Is there any real benefit in me keeping the money in an ISA? I dont really want to go throught the hassle of moving an ISA as reading up on it, it seems quite complicated.

Thanks.

flaneurs_lobster

What sort of ISA (fixed/variable) are you looking to move to?

Plenty of either flavour with a better rate than 3.6%.

eskbanker

Are you using (or planning to use) all of your 2026/27 ISA allowance?

EthicsGradient

Why is 3.6% the best rate you can get for a transfer? The top Easy Access ISA at MoneyFactsCompare, Trading 212's Cash ISA, at 4.63% variable, seems to accept transfers:

You can transfer your ISAs in and out of Trading 212 without any restrictions or fees, although your other broker may charge you a fee.

https://www.trading212.com/isa?cash-isa=

friolento

If you never intend to add to your ISA savings, there is little point in having one. However, bear in mind that cash ISA annual contribution limits for under 65s are planned to be reduced to £12,000 per annum. So many people are trying to protect their existing ISA amounts, and maxing as much as they can this year.

Your calculations don't quite add up - if you are a BR tax payer, you currently have an annual Personal Savings Allowance of £1,000. £500 if you pay HR tax, and no allowance for Additional Rate tax payers. Anything above £1,000 for a BR tax payer gets currently taxed at 20%, and 22% from next tax year. So if you are a BR tax payer, you'd not pay any tax on £900 interest.The Personal Savings Allowance may not be available forever, who knows.

Transferring an ISA is not complicated at all - you simply ask the new provider to transfer the ISA for you. They will do all the work.

pochisoldi

The "hassle" of moving an ISA is imaginary. You open the new ISA. You fill in a form and send it to the provider of the new ISA. The transfer gets handled by the "receiving provider".

Meanwhile transferring money between taxed accounts goes something like, Open a new account with new provider. Go to old provider and get them to hand the money to you. You then have to set up a bill payment to transfer the money to the new provider, and then check that the money arrives.

"So am I missing something? Is there any real benefit in me keeping the money in an ISA?"

Yes - tax free interest until you permanently pull the money out of the tax free wrapper.

If you pull the 20k+interest out of the ISA and into a regular taxed savings account, if you are under 65, come next year you'll find yourself unable to put more than £12k of that back in an ISA. Keep the ISA this year, and next year you'll have the whole £12k allowance available for you to use for "new" money.

friolento

https://forums.moneysavingexpert.com/discussion/comment/82053287#Comment_82053287

Most providers have the ISA transfer form online, many as part of the ISA application.

gerdo

https://forums.moneysavingexpert.com/discussion/comment/82053276#Comment_82053276

I looked at this and that rate is just for new money, if transferring an ISA the rate is 3.6%

gerdo

https://forums.moneysavingexpert.com/discussion/comment/82053277#Comment_82053277

I have other interest that takes up the Personal Savings Allowance so it doesnt apply. I have read some horror stories about transferring ISA, especially about transferring out of Trading 212. So if my original post makes sense, I'd rather just go with the least complicated option

RobM99

https://www.moneysavingexpert.com/savings/best-cash-isa/ ← This might help

gerdo

https://forums.moneysavingexpert.com/discussion/comment/82053268#Comment_82053268

The best rates quoted all seem to be for new money, when I read the details about transferring in an ISA, the rate drops. eg Trading 212 quote 4.63% but their rate for transferring in an ISA is 3.6%