Are ISAs worth bothering with?

[somebloke123]

For standard rate taxpayers that is.

As the new financial year approaches we are all enjoined by the Personal Finance press to make full use of our annual ISA allowance.

However:

1. Cash ISAs: the returns on cash investments is rubbish and barely able to keep up with inflation - often not even that. I know that the interest payments are tax free, and savings in standard savings accounts have 20% subtracted from the interest. However you may be able to find saving accounts that will make up for this. For example a savings account giving 3% would be equivalent to a 2.4% one in a cash ISA.
   

OK I suppose you might be likely to do a bit better in an ISA on the whole but it's all very marginal at current rates.

1. Stocks and shares ISA. If I understand correctly share dividends have 10% deducted whether they're in an ISA or not, so there's no difference.
   

Of course for higher rate taxpayers they really do make a difference.

Am I missing something here?

[ChasingSquirrels]

Cash ISA's

On a yearly basis - no they might not make much of a difference (though I am getting 3.1% on my cash ISA and only 3.2% on my cash savings). It isn't much, but it is still extra money (plus the tax saving) in my pocket.

Where I see the major benefit is in the longer term - I have been putting the max allowance into a cash ISA almost since the beginning, and shifting them around to get the best rates I could. I now have nearly £60k in ISA's.

Stock & Shares

The benefit, again increasing the more you have in them, is the tax free capital gain element - admittedly you have to have quite a lot (or be lucky in your investments) to benefit from this given the Annual CGT Allowance.

[somebloke123]

Thanks for that. I had forgotten about the CGT aspect - perhaps because I'm a long way off its applying to me!