Cash Isa And Benefits

[daisya]

Hi

Not sure where I should post this so trying here. Elderly friend (married) gets help with community charge payments (are these tax credits? not sure), he receives state pension and occupational pension, has a small amount of savings in the bank and that's it as far as I know. I said I thought he would benefit in getting a Cash Isa too so he can gain some tax free interest but he reckons that he will have his benefits cut because of the Isa. I thought not because he's not really going to have loads of money to put in it but I don't want to misinform him when I could be wrong. So would a cash Isa reduce his benefit help at all can anyone tell me please? Many thanks.

[boxtops]

I am no expert but if he's just popping his bank savings into the ISA, it's surely not going to make any difference? ISA rates at the moment are only about 2-3% interest p.a. - so you are right about it being tax free - but it's not going to increase his capital greatly.

[daisya]

Hi boxy,

Thanks that what I thought but he is very wary, in fact I said he wouldn't be making much change to what he's got now, it's not as though he has got more money coming in to stash away in an Isa. I need to be clear on this and don't know what to google to find the definitive answer for him.

[boxtops]

If he's allowed a certain amount of money in the bank before his benefits are affected, it doesn't matter where it is. Is he paying tax on his savings at the moment? If not - leave it where it is, IMO, if it's not very much.

[Maydup]

An ISA is no real benefit to a person who's reached retirement age and who's on a low income as he will not pay tax on his savings anyway.

His savings will or won't affect his benefit wherever he saves it.

[daisya]

Thanks for your answers, yes his savings are taxed but apparently not much interest taken so I know what you're saying boxy. It's just that I thought if he (or anyone) doesn't have to pay tax then why do it. His pension is taxed too so I thought why pay tax on savings as well if he doesn't have to. Perhaps I shall leave well alone (me and my advice lol).

[ladyalex]

If he pays tax and he can find an ISA paying a decent rate (almost impossible imho) , he will be better off and as others have said, it makes not a jot of difference to his benefits ....he will either be above or below the threshold wherever he saves it.
If he does not pay tax, he should ask his bank/building society for the appropriate form to send to HMRC to have his bank /building society pay his interest without tax.

[Dee Sa]

as far as I know you are allowed 16 grand be it Isa or just in your bank account, not a penny more.