Cash ISAs? Do me a favour, only for high rate tax payers

Aegis

PasturesNew wrote: »

I've never had the luxury of having spare cash to save. Any "savings" were always short-term until the next disaster, so we are talking hand-to-mouth here forever.

But I think there's a lot of assumptions made about ISAs. My circumstances have recently changed and I can now afford savings. So I will now be getting a cash ISA each year (that whole share ISA I've still no understanding about) ... I didn't realise that you could buy an ISA each year and therefore the cumulative effect of the interest free on it. Although I still don't know, perhaps this can be answered: If in Year 1 I put in £3k, then in Year 2 the interest is added (let's say £180). Does that mean that the next year the whole £3180 is tax free interest again? or is the tax free bit just on the initial £3k?

As has been pointed out above, it's the cumulative effect of being able to save £3k every year that, over time, makes these interesting... IF you're wealthy enough to have that much each year to save in the first instance.

The compounding is tax free as well. Until you take the money out of the wrapper, everything in there is tax free

debbie42

I'm currently below the tax threshold, yet still feel that cash ISAs are valid for me. It helps avoid going over the tax threshold, so helps with extra income from my other savings, and who knows what my tax liabilities will be like in future?

meester

debbie42 wrote: »

I'm currently below the tax threshold, yet still feel that cash ISAs are valid for me. It helps avoid going over the tax threshold, so helps with extra income from my other savings, and who knows what my tax liabilities will be like in future?

And they also do not affect your tax credits entitlement. You could in the future be earning a few grand a year from them, which would costs hundreds off that entitlement if it was not tax-free. And that's in addition to the income tax saving. For people on low incomes the tax on savings is 59%. 39% tax credits withdrawal, plus 20% income tax.

Well worth it.

CannyJock

leejp wrote: »

I didn't even bother opening a cash ISA for this, and I reckon too many people are spending lots of time sifting through this cash ISA nonsense.

Fortunately with sites like this, you don't need to spend time sifting through them - you just apply for the best one and put what you can up to that years limits in it. It's very simple, you should try it. The IceSave one is all online, no forms and no hassle.

My shares investments totally tanked last year (with one exception where I self-invested in East Asia markets), so my cash savings need to work that bit harder to make up for poor market performance.

MrMicawber_2

A couple of other points - as well as tax credits income from ISAs isn't taken into account for age allowance.

Apart from all the good comments above, why give ANY money away unnecessarily, when it takes no extra effort (well a tiny bit) to open an ISA than a normal saving account.

Taking care of the pennies might be hackneyed but it doesn't half work.

Fella

It also makes your self-assessment form a LOT easier to do if as much as poss is in non-taxable investments.

Hungerdunger

margaretclare wrote: »

I have learned from experience over this one, and I am in process of pulling everything out of my equity ISA (having lost money over it!) and topping-up my cash ISA.

As my IFA always reminds me when I grumble about my S&S ISA: you haven't lost any money at all on your stock and shares until you actually cash them in.

MrMicawber_2

Margaret - this is going a bit from one extreme to the other. Equity ISA's can be very worrying when things aren't going well, but they should be a minimum 5 and more like 10 year investment. Over 5 & 10 years they have done pretty well. If you look back at the 1987 crash it hardly registers on the graphs now.

Both Cash and Equity are excellent in their place. Whether cash ISA's come first followed by equity ISA's would depend on what your objectives are & timescale etc etc.

But if Equity ISA's simply worry you to death then they probably are'nt for you.

Biggles

A single post, posing a contrarian point of view, and not followed up by any further post? Looks like a bit of trolling to me. Best ignored.

The bit I liked most was "Last edited by leejp : Yesterday at 10:13 PM. Reason: spellinh". You couldn't make it it up, could you? :-)

MrMicawber_2

It sounds that if you are retired on, as you say, a decent income (inflation proofed at all?) then cash ISA's are probably just the job. No worries and plenty of decent rates available above RPI (although as we keep hearing RPI for the over 60's is over that for younger ages).

My father stopped equity investments some years back and is very happy with cash ISA's.