Savings Account Advice

Ljc80_2

Just looking for some advice

I have in recent years used Kent reliance fixed rate ISAs to save into, making regular deposits of varying amounts. Now they have changed it and I can’t make regular deposits I’m looking for the best option for savings.

Would it just be a regular savings account?

im not really sure about the tax implications of a normal savings account having always used an isa, is tax just taken off the balance each year?

I still have money in the fixed ISA for a year before it matures. When it does is it easy to move this to a new fixed ISA and can I also top it up with the money I have saved in the new account I.e putting money from 2 sources into 1 ISA when it’s opened?

nottsphil

You're a bit behind the times; savings interest has been paid gross for several years now. You can earn more after tax with the higher regular savings accounts then you can in any ISA, but we don't know at what rate you pay tax so difficult to advise. You need to put the ISA part of your question in a separate thread on the relevant sub-forum.

gravel_2

There are easy access ISAs you could open to use up your annual allowance. This retains the tax free status of your savings, allows you to pay in via regular deposits, but you lose the certainty of the fixed rate. Not a bad option right now (or for the last while). Easy access rates have been quite consistent for a few years now and seem likely to inch up in the coming months/years. If you pick an account like this, and suddenly the rate becomes uncompetitive, you can simply open another and do an ISA transfer into a different one.

If you save in non-ISA savings you will be paid the gross amount, the bank will report the interest to HMRC, and they will recover any owed tax from you via tax code adjustments in subsequent tax years.

Ljc80_2

I’m a bit clueless tbh, I have no idea what you mean by “paid gross for years”! lol

40% tax

I would probably only save about 5k a year last couple of years as have been more focused on overpaying mortgage

Yorkie1

When the fixed ISA matures, you will be contacted by Kent R about a month before the maturity date with your options at that point. Usually those options include a) withdrawal of funds to a nominated account; b) renew it to another fixed rate ISA with them, c) let it go to an easy access ISA with them.

Do not go for option a) unless you actually want the money to lose its tax-free status outside the ISA wrapper.

If you want to move the money to a different ISA provider when it matures, then either 1) open the ISA with the new provider shortly before the maturity date and ask them to transfer the Kent R one to them once the fixed rate ends; or 2) let the fixed rate ISA mature into an easy access ISA with Kent R and then open the ISA with the new provider and ask them to transfer the funds immediately. You will get a tick box choice when opening that new ISA.

At the same time as opening the ISA to transfer in the funds, you can also add new funds at that point, yes, as long as you have not already placed £20K of new money into an ISA this tax year (a transfer is not new money; and ignoring flexible ISA rules).

I don't think there are many fixed rate ISAs which now allow regular contributions like the Kent R one did. So if you wanted to contribute regularly to an ISA, you're probably looking at an easy access ISA (others may be along shortly to provide better info on this).

Don't forget that you could also have separate ISA products for the transferred Kent R ISA, and your new money. You can have more than one ISA at once.

If you prefer to use regular savings outside an ISA, then whether or not you pay tax on the interest depends on your income tax rate and how much the interest is.

If you are a basic rate taxpayer, then the first £1000 of taxable interest which you receive in a tax year is taxed at 0%, so no tax is payable in effect. If you are a higher rate taxpayer, then the 0% amount is £500.

Beyond that limit, if you are a basic rate taxpayer, the interest is chargeable at 20% (22% from next tax year), or 40% / 42% next tax year if you are a higher rate taxpayer.

So, for many savers, they don't pay any tax on savings interest outside an ISA.

Bear in mind that from next tax year, you can only contribute £12K to a cash ISA unless you are turning 65 in the tax year (or older). So if you have significant savings funds on which the interest might become taxable in the future, you might wish to consider sheltering them in a cash ISA now.

Yorkie1

https://forums.moneysavingexpert.com/discussion/comment/82147857#Comment_82147857

"Paid gross" means that interest on savings in non-ISA accounts is paid without the bank deducting tax first. It used to be the case that they deducted basic rate (20%) tax, and issued you with a tax certificate indicating the gross amount with tax deducted. If you didn't actually need to pay tax on the interest, you had to do a reclaim of the tax from HMRC.

Some years ago, this changed so that all savings interest does not have tax deducted. HMRC then decides how to tax it from scratch, as described above.

amcc1

For general ISA details straight from the horse’s mouth (gov.uk) see: https://www.gov.uk/individual-savings-accounts

It’s helpful to have this basic information as a starting point. Some providers then add their own additional rules and limitations which can add extra confusion!

janusd

Beverley Building Society have a Regular Saver Cash ISA paying 4.50% (£20-£2000 per month) - that might be worth taking a look at too.

Regular Saver Cash ISA | Beverley Building Society : Beverley Building Society

Farway

https://forums.moneysavingexpert.com/discussion/comment/82148562#Comment_82148562

Or you may wish to consider the Tesco flexible ISA, 4.2% , no fixed pay in amount, pay in whatever, when ever, ability to withdraw cash any-time if needed

Only catch is the bonus interest is one year only, so may have to move on next year

https://www.tescobank.com/savings/isa-accounts/instant-access/