1 year fixed ISA or 1 year fixed cash?
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Brummieboy
Posts: 2 Newbie
I was going to put £20,000 in a 1year fixed ISA but the best rate I can get is 1.55%
Is there any advantage in me doing this when I can put my money in a 1year fixed cash account and get 2.02%?
I know that I will not pay tax on my savings in the ISA but even taking the 20% tax off the cash account the cash account will still be a better overall higher rate.
Is there any advantage in me doing this when I can put my money in a 1year fixed cash account and get 2.02%?
I know that I will not pay tax on my savings in the ISA but even taking the 20% tax off the cash account the cash account will still be a better overall higher rate.
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Comments
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Brummieboy wrote: »I was going to put £20,000 in a 1year fixed ISA but the best rate I can get is 1.55%
Is there any advantage in me doing this when I can put my money in a 1year fixed cash account and get 2.02%?
I know that I will not pay tax on my savings in the ISA but even taking the 20% tax off the cash account the cash account will still be a better overall higher rate.
2.02% is 1.616% even after 20% tax, so better than 1.55%
BUT
As a 20% taxpayer, you are entitled to receive up to £1000 interest a year without paying any tax, so depending on what other savings you have, you might get the full 2.02%.
If you are prepared to jump through a few hoops, you could get more than 2.02%, using several current accounts and regular savers.0 -
Sorry to jump on your thread but the situation becomes very different if you are in my position,myself and the wife have built up 70K cash Isa pots each and due to retire in a year so it will be tax free when we decide to draw down the funds.0
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Basically for most savers , it is better nowadays , not to have a cash isa as similar non isa savings accounts end to pay a better rate ( as you have spotted ) and you can earn up to £1000 a year in interest outside an Isa without having to pay tax . Some caveats to that are:
1) If you are a 40% taxpayer the tax free interest allowance is only £500
2) If you have a high level of cash savings or you expect to at some point
3) If you think interest rates could rise a lot but the tax free allowances might not
In these cases a cash isa can still make some sense, depending on exact circumstances .0 -
But the tax-free status of ISAs is only relevant when building and holding the pot; by the time you're drawing down from it it doesn't matter whether it's a £70K ISA pot or £70K in a non-ISA account as there's no tax on the way out of either.Sorry to jump on your thread but the situation becomes very different if you are in my position,myself and the wife have built up 70K cash Isa pots each and due to retire in a year so it will be tax free when we decide to draw down the funds.
Just out of curiosity, how much interest are you earning on those £70K ISAs?0 -
Albermarle wrote: »1) If you are a 40% taxpayer the tax free interest allowance is only £500
2) If you have a high level of cash savings or you expect to at some point
3) If you think interest rates could rise a lot but the tax free allowances might not
In these cases a cash isa can still make some sense, depending on exact circumstances .
I'd add
4) if you are intending to invest significantly in stocks and shares soon. You can transfer prior years' cash ISAs to S&S ISAs and hence not need to pay any tax on your S&S returns - as well as not needing the record-keeping hassle that comes with shares in taxable accounts0 -
2.02% is 1.616% even after 20% tax, so better than 1.55%
BUT
As a 20% taxpayer, you are entitled to receive up to £1000 interest a year without paying any tax, so depending on what other savings you have, you might get the full 2.02%.
If you are prepared to jump through a few hoops, you could get more than 2.02%, using several current accounts and regular savers.
If you decide jumping through the hoops, here's a best of both world's twist:
a) Put your £20k into (say Ford) Flexi cash Isa.
b) Then transfer it to your hoop jumpers until end of March '19 (leaving a few quid in the FI).
c) Add sums back into the FI bringing it back up to £20K before the tax year end.
d) April 6th rinse & repeat - and add next years allowance into the same machine.
Result is you keep the ISA allowance and get the best non ISA rates...
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Thank you to everyone that replied
I am a lower rate tax payer so it as as I thought, I can get a better rate with a fixed rate cash and pay tax on the interest and still be better off than putting the same amount into a fixed rate ISA, I needed reassuring that I hadn’t missed something obvious. Thanks again.
It is really annoying that the same bank is paying 1.92% on a 1 year fixed rate cash account and only 1.55% on a 1 year fixed cash ISA. Oh well they have lost my business and I will put my money in another bank’s fixed rate cash account and even after paying tax will be better off.0
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