An interesting ISA scenario!

john_kane_2

Scenario:

£100k in savings (£10k of which in an ISA)
£20k in equity+commodity funds (£13k of which in an ISA)

now, say my salary just about uses up my personal income allowance and also brings me into the higher tax bracket (above £36k)

so the interest i pay on my savings, i pay at 40%.

i will pay no tax on the gains from the funds as it won't exceed my capital gains allowance of £9k or so.

if i wanted to spend all my savings in 2 years time on a house, but always would hold my funds (and maybe in 5-6 years time my capital gains allowance was being used up, so i was now having to pay 40% on the gains from funds).

how should i be using my ISA allowances?

i think i have unwisely used this years £7200 on equity. however, given eventually i will end out paying 40% on both income and capital gains as i'd of used up my allowances, does it make sense to go for the bigger allowance anyway, of £7200 compared with £4k or so for savings ISA.

From what I can make out, in terms of transferring my existing £10k cash ISA, it would be best to wait till I had used up my capital gains allowance and then switch it to an equity ISA.

thoughts greatly appreciated, ive spent quite a while trying to get my head around this.