Which ISA is best

carnut1234 · 17 August 2019 at 7:12PM

Hello all,

my brother who is a very good saver currently has over £5k in his current account. He has asked me to help him with an isa of some sort and i could do with some help in understanding which is probably best.

He has learning difficulties and currently lives at home. we are not sure if he will ever move out however he has mentioned buying his first home/apartment.

i have been looking at help to buy isa which i believe can give unto £3000 towards a house purchase however you only receive this if you buy a home.

i have then looked at life time isa which i believe could give him a better return but again is restricted to buying his first home or when he retires.

im not sure what's best, he might not ever buy a home which then makes me question if a help to buy isa is the right choice.

The same for the life time isa, if he doesn't buy a home then yes its good for when he's retired but is the money lockdown until then?

i suppose my question is which isa is best suited if he does what to buy a home but also if he doesn't which one gives him the option to draw money out if needed.

as mentioned he has £5k which can be transferred straight into savings and he could comfortably save £200 a month.

some advice and information would be great.

dan

Dird · 17 August 2019 at 7:22PM

First you should talk to him more about his plans to buy a house. He'd need a salary roughly 25% of amount he wants to borrow (e.g. if his salary is £25k and the house is £125k then he will need a £25 deposit). The further down south the less likely home owning is on such a salary.

If he is confident he will buy in the future & that it's achievable then one of those would be the best option. Otherwise he should look at a S&S ISA as it can be accessed at any time but you don't have the 25% bonus of the other ISA(s)

msallen · 17 August 2019 at 7:27PM

You have correctly identified the restrictions on withdrawing from a HTB or lifetime ISA.

If you/he are not comfortable with these and want easier access to his savings then it is probably better not to use any sort of ISA at all, as a "standard" ISA only prevents him being taxed on any interest earned, and the first £1000 a year of interest is tax free anyway (or £500 for a higher rate taxpayer). You/he can no doubt get a better rate of return from a non-ISA account - probably 1.5% in easy/instant access, rising to somewhere just above 2% if he is prepared to commit to leaving it there for a fixed term of for example 1 or 2 years.

If you/he are prepared to use a number of current accounts then you can better rates on regular savings linked to certain current accounts (such as HSBC, First Direct etc) which will allow him to put his £200 per month away for up to a year at 5% interest - there are literally hundreds of threads discussing these if you search the forum for "regular savers"

Dazed_and_confused · 17 August 2019 at 7:42PM

the first £1000 a year of interest is tax free anyway (or £500 for a higher rate taxpayer).

At present £18,500 interest can be received before any tax becomes payable. This amount is reduced if the op had other taxable income such as wages, pension income, taxable state benefits etc.

The £1,000 you refer to does not apply to lower earners. Which the op may or may not be.

A basic rate taxpayer can potentially earn £5,999 in taxable savings interest before any tax is actually payable.

eskbanker · 17 August 2019 at 7:44PM

carnut1234 wrote: »

my brother who is a very good saver currently has over £5k in his current account

....in which case he probably isn't a very good saver!

A good place to start is http://www.moneysavingexpert.com/savings/which-saving-account which explains the range of options available to make the best use of a pot of money, cash ISAs (other than HTB/LISA) not featuring particularly highly....

Which ISA is best

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