ChatterBank0 min ago
Isa Or Higher Rate Saver
13 Answers
I’ve just received a lump sum from work and am not sure whether to use a 1 year ISA paying 5.5% or Saver account paying 6.5% . I know I won’t pay tax on the ISA but would I get a better return on the saver despite paying tax? Thanks in advance
Answers
Best Answer
No best answer has yet been selected by medsecslave. Once a best answer has been selected, it will be shown here.
For more on marking an answer as the "Best Answer", please visit our FAQ.It depends on what rate of tax you pay, although even if you're not a higher rate payer and pay tax at 20%, like bobbinwales said, the equivalent rate of the saver account is 5,2%.
However, you need to remember that you can earn £1000 in interest tax free, so it all depends on how much money you've got.
The first £15 384.62 will earn £1000 in interest in the saver account. Anything more than this and you'll have to pay interest on it so the equivalent rate will be 5.2%, so put the rest into the ISA and earn 5.5%.
Summary:
Put the first £15 384.62 into the saver account paying 6.5% and put the rest in your ISA.
This does however, assume that you won't be earning interest on savings elsewhere??
However, you need to remember that you can earn £1000 in interest tax free, so it all depends on how much money you've got.
The first £15 384.62 will earn £1000 in interest in the saver account. Anything more than this and you'll have to pay interest on it so the equivalent rate will be 5.2%, so put the rest into the ISA and earn 5.5%.
Summary:
Put the first £15 384.62 into the saver account paying 6.5% and put the rest in your ISA.
This does however, assume that you won't be earning interest on savings elsewhere??
At 6.25%, if you pay tax at 20%, the equivalent rate would be 5.00%.
However, remember that you don't pay tax on your first £1000 of interest.
£16 000 at 6.25% would generate £1000 of interest.
Put £20k into an ISA and £20k into the saver. This will maximise your interest and you'll pay minimal tax.
The saver will generate £1250 of interest and if you're a 20% tax payer you'll have to pay £50 tax.
The ISA will generate £1100 of interest and it will be tax free.
However, remember that you don't pay tax on your first £1000 of interest.
£16 000 at 6.25% would generate £1000 of interest.
Put £20k into an ISA and £20k into the saver. This will maximise your interest and you'll pay minimal tax.
The saver will generate £1250 of interest and if you're a 20% tax payer you'll have to pay £50 tax.
The ISA will generate £1100 of interest and it will be tax free.
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