Is an ISA always better than savings account?

wooders

Just wondering. I am a tax payer and want to put some money away. I know ISAs are usually the better payout c.6% ish, but is this better than saving in a savings account (eg one you don't touch for say, a year or so) that appear to have better % rate.

Please advise, I'm talking around £300 per month to put away.

Any other info / suggestions to make the best return would also be appreciated

thankyou

Aegis

If you pay taxes and are willing to be a bit of a rate tart with your ISA, you'll probably do better than in normal savings accounts. Remember that normal savings accounts by default will tax the interest by 20% at source, and that as a higher rate taxpayer (if you aren't then consider that you might be in a few years!) you'll need to pay 25% of what's left over when you file your tax returns!

All in all, it's worth building up a nice little tax-free nest-egg.

The additional bonus is that sometimes ISA amounts don't count towards your capital or income when assessing your eligibility for certain state benefits.

Paul_Herring

wooders wrote: »

Just wondering. I am a tax payer and want to put some money away. I know ISAs are usually the better payout c.6% ish, but is this better than saving in a savings account (eg one you don't touch for say, a year or so) that appear to have better % rate.

Generally yes. On a 7% fixed rate bond, you're only actually getting 5.6% after 20% tax. To match a 6% ISA, the bond would have to be at least 7.5%

Mikeyorks

If you're a taxpayer and the funds are going to remain fairly untouched .... then a good paying ISA will normally beat an equivalent Savings account. Simply on the tax benefits ... as elaborated by Aegis.

The interest rate lag, over Savings accounts, that ISAs typically had a few years ago ... is largely extinguished. And makes your decision so much easier.