ISA or high interest savings account

vinuela13

My mother who is retired currently has £16,600.00 in a RBS ISA account which she is currently earning 4.95% interest on.She hasn't deposited anything into this account for this tax year.
My question is as she is a non tax payer does she really need an ISA account or could she save her money in an ordinary savings account and if so which would be best.
We have looked at the ICICI bank 1yr fixed term account which I believe is currently paying 7% interest.
Thanks

isofa

If she's never likely to become a tax payer (remember interest on accounts is classed as income), then there isn't any gain to an ISA, so go for the highest gross % you can find, and ensure they pay gross interest into the account.

Icesave have a 1 year bond for 7.01% and there are higher ones too. Check out the best buys at Moneyfacts.

Milarky

diddlyidi wrote: »

My question is as she is a non tax payer does she really need an ISA account or could she save her money in an ordinary savings account and if so which would be best.

Assuming she is highly likely to remain a non-taxpayer in terms of income then the ISAs aren't worth keeping are they?

ISAs: only really useful for Higher Rate taxpayers, moderately useful for Basic Rate taxpayers and as useful as a Lottery ticket to Nil Rate taxpayers. [i.e if you win the Lottery then the ISAs begin to 'earn their keep']

I don't think ISAs confer any benefit where things like pension savings credit come in either - all savings ISAs or otherwise are taken into account [Gordon slipped up there]

So, yes, she could do a lot better in a gross paying 'taxable' account - and she should draw them out and put them somewhere more useful as you suggest

whu

Kaupthing edge have a 1 year fixed for 7.01% also

caveat_emptor

If your Ma leaves the tax-free shelter make sure she returns the IR non-tax payer form IR85 to her bank/BS or tax will be deducted.

standupguy

You do not mention if she has other savings?

If she has, remember that to continue the non-tax payer status her income from other savings accounts pa should be less than her tax allowance - if they are anywhere near her allowance then she may be better to hang on to the Isa?

cheerfulcat

Milarky wrote: »

I don't think ISAs confer any benefit where things like pension savings credit come in either - all savings ISAs or otherwise are taken into account

ISA income doesn't count for age allowance purposes, though.

vinuela13

Thanks to everybody for their quick replies.I will continue my search for a high interest savings account and certainly bear in mind the ones that have already been mentioned

whu

just thought - if your mum wants a monthly income you could have a look at the westbromwich building society - the 1 year bond is 7.05% but they also have monthly interest as an option at 6.83%

martinman3

Don't forget that any pension, state, private or company, is classed as income, as well as savings income, so the only way that you can be certain that she will pay no tax is by looking at her tax code. Her remaining personal allowance must be greater than the interest on her savings.

For anyone else reading this thread, if the interest is only a little more than the personal allowance it is taxed at 10% and you are entitled to a rebate if you received it net of tax which would have been charged at 20%.