Cash ISAs: Are they worth it?

boy_3

Just trying to crunch some numbers here. If I put in 3K in Cash ISA which is the limit, I can earn around 180£ in interest in a year. Assuming 6% rate. This is tax protected.

But, if I pay tax on it (which means keep it in the regular savings account), I lose around 20% of 180 which is 36 pounds.

So, is the cash ISA account really worth the hassle to save 36 pounds? Unless they allow you to save more, I don't see a point of using cash ISA as one of my investment vehicle. I like shares ISA though as you can gain more in that over the years.

Comment?

Lokolo

Some people prefer security rather than risk?

£36 a year could buy you a few DVDs. If you do it every year you get year 1 as £36, year 2 at £72, after 10 years thats £360 a year you save... so yeh... worth it

jem16

It might not be worth that much over one year but take 10 years worth of contributions, i.e. £30,000 and you lose £360.

I would rather £36 was in my pocket than the taxman's.

maypole

boy wrote: »

Just trying to crunch some numbers here. If I put in 3K in Cash ISA which is the limit, I can earn around 180£ in interest in a year. Assuming 6% rate. This is tax protected.

But, if I pay tax on it (which means keep it in the regular savings account), I lose around 20% of 180 which is 36 pounds.

So, is the cash ISA account really worth the hassle to save 36 pounds? Unless they allow you to save more, I don't see a point of using cash ISA as one of my investment vehicle. I like shares ISA though as you can gain more in that over the years.

Comment?

It certainly wouldn't be a hassle to me if I were going to save £36. Remember, you are on the moneysaving site!! In the new tax year you are allowed to put £3600 in an ISA. I use my ISA allowance every year.

meinnit

Even more worthwhile if you earn enough to pay the higher rate of tax in the future.

Mikeyorks

boy wrote: »

Comment?

Now compound it over 10-15 years. And make yourself a HR taxpayer part way through.

Then ask the same daft question ... and see if you come up with the same answer?:p

McSaver

Yes they are worth it...

They are a shelter from the taxman which means more cash in your pocket, the more you can contribute over time. the more money you save in paying tax on your interest you recieve.

earlgrey_3

Yes, they are worth it especially after a few years when the capital builds up. Similarly with S&S ISAs but only for some people in certain circumstances.

But what is obvious from this site is that a lot of people find it mighty confusing and as a result miss out. Others might not have the funds this year even though they might in the future so their allowance is lost forever and can never catch up. Another problem is that small investors can be persuaded by the ISA rules to invest in the stock market at the end of the financial year regardless of whether that's the best time or not.

Wouldn't it be nice if the government removed all the bureaucracy and simplified the whole business in some way such as allowing everyone a certain amount of investment income tax-free each year no matter where they placed their savings?

macca64

Definately worth it. Also income from ISA's will not reduce the age related allowance in retirement.

Also the tax saved in year one is compounded year on year. If after a few years you have £20k in ISA's earning 6.5%, you will save £260 being a basic rate tax payer and £520 being a higher rate tax payer.

You decide if it is now worth it.

macca64

earlgrey wrote: »

Wouldn't it be nice if the government removed all the bureaucracy and simplified the whole business in some way such as allowing everyone a certain amount of investment income tax-free each year no matter where they placed their savings?

That would be a great idea, but the government won't do it as it will cost them too much. It's the same reason why you have to claim for tax credits etc, as some people don't bother. If they gave them out automatically to people who qualify it would cost them even more!

mw2655

boy wrote: »

Just trying to crunch some numbers here. If I put in 3K in Cash ISA which is the limit, I can earn around 180£ in interest in a year. Assuming 6% rate. This is tax protected.

But, if I pay tax on it (which means keep it in the regular savings account), I lose around 20% of 180 which is 36 pounds.

So, is the cash ISA account really worth the hassle to save 36 pounds? Unless they allow you to save more, I don't see a point of using cash ISA as one of my investment vehicle. I like shares ISA though as you can gain more in that over the years.

Comment?

hi you mention shares ISA's as you can gain more... you cn also lose more;)

it's important to think of a cash ISA as a good "savings" account

a shares ISA is a way of "investing" you have to do your homework.

cheers matt