Please help-can you pay monthly deposits into this ISA?!

[rollonthesummer]

This has been recommended to me

www.coventrybuildingsociety.co.uk/savings-accounts/cash-isa.aspx

I have about £6000 to invest and wanted to add an amount by DD each month on top.

It states this though,

After you have made your initial deposit, you can make additional deposit(s) while the account is open to new investors or for a period of seven calendar days, whichever is longer.

and I don't understand what it means!?

Banks and building societies tend to change their interest rates every few months. Some accounts are permanently 'open' (ie you can keep operating the account and the interest rate varies over time) while others have one interest rate (eg fixed-rate accounts, like the one you've linked to) and the bank/building society closes the account to new investors at some point (existing account holders aren't affected) and then advertise a new version with a different interest rate. The 25 in brackets after the account name might indicate that it's the 25th version of this type of account, each of which will have had a different interest rate. At some stage the building society will withdraw this account to new people and then create a new one (26?) with a different interest rate. (Sorry that's rather long.)

So if you open the account now, you'll be able to add to it until they withdraw it for new customers. That might be a few months, or it could be a few weeks if the interest rate is very attractive. That type of account is better for lump sums, rather than monthly deposits.

Ah-that makes far more sense, thank you very very much!~

I don't want to get the cash out in a hurry-I just want to deposit a lump sum and then add a little to it every month. You don't happen to know what sort of ISA would be best, do you? I am so baffled, I don't know where to start!?

I'm looking at this one now!

www.nsandi.com/direct-isa

If you go to one of the many comparison websites they have lists of ISAs. www.comparethemarket.com/savings-accounts/cash-isas/ for example. You can see pretty easily the interst rate, which can be run online or by post, which accept transfers from other ISAs, what the minimum/maximum deposit is etc. I suggest you look at the instant access ones rather than fixed term because fixed term usually means depositing one big lump sum and leaving it alone. Instant access can be added to and withdrawn from more easily

There are 3 types of ISA:

1. Fixed rate/fixed term: no withdrawals

1. Fixed rate/fixed term: withdrawal allowed with penalty (eg loss of several months interest)

1. variable rate/open ended duration: you add/withdraw whenever you want

The fixed rate accounts offer higher interest rates because you're tying in your money for longer (eg 1, 2, 3 or more years). The longer the term, the higher the interest rate offered.

So it's a balance between finding a high rate but keeping your money (or at least some of it) easily accessible. That will depend on how much savings you have and what your spending plans are for the next few years (including some for emergencies).

Depending on your personal circumstances, you might want to consider putting some or all of your £6,000 in a fixed term account to get a higher rate of interest and then in April (in the new tax year) opening an easy access ISA.

That Coventry one matures in almost 3 years time and doesn't allow any withdrawals, although if you do need the money you can close the account entirely and they'll deduct 120 days' worth of interest.

I find that Nationwide and Kent Reliance Building Society are pretty consistent for offering high rates (at least for their fixed rates), so it's worth checking their rates as a barometer of good interest rates. Other institutions will offer eye-catching rates for a short period so it's worth keeping a look out for those too.

Last year Nationwide had a regular savings ISA (which is no longer available to new investors) with a decent interest rate so maybe look out in April to see if they offer another one. Other institutions might also launch regular savings ISAs in April.

Lastly, as interest rates are so low at the moment, if you are saving relatively small amounts then it might not be worth the hassle to chase the very highest rates. For example, if you had £1,000 for a year in an account paying 1.5% you'd receive £15 interest. In an account paying 1% you'd receive £10. That's a difference of only £5. Sadly you'd save more than that if you didn't buy a couple of magazines/bars of chocolate/glasses of wine during the year.

As a rule of thumb with today's interest rates, I'd say look for at least 1% on an easy access account, and aim for around 2% on a fixed term account.

That's brilliant-thank you both for your replies! There's so much to think about.

So-that Direct Isa at 1.5% with NS+I doesn't sound too bad then?

1.5% is a reasonably good rate at the moment.

Hello

Have a look here www.moneysavingexpert.com/banking/

ISA's are tax free, but some current accounts pay more interest

Hmm, ok-Iw ill do.

The stuff I was looking at this morning mentions ISAs being good as you don't pay tax on savings.

This is probably a really stupid question, but how much can you have in savings before you have to pay tax on it? Do you have to fill out a tax return (which everyone was talking about last week and I didn't think applied to me) if you have savings or is it only when you have saved over a certain amount?! If you don't fill out a tax return, how is the tax paid??

I told you I was confused!

Can anyone help me on this one?

Who pays tax on savings and how? Is it something you need to declare on a tax return or is that only if you are earning a lot of money from the savings?

Say, eg I earn £15,000 annually from a part time job and have £5k in premium bonds and £6k savings-will I need to declare that? Does it matter what DH earns?

Premium bonds are tax free so you don't need to worry about them. Your job is presumably pay as you earn so you don't need worry about that. The interest on your savings will be taxed by the bank at the basic rate, so as long as you only pay basic rate tax you don't need to worry about that either.

Ditto your partner unless you have a joint savings account with them and they pay the higher rate of tax, in which case he/she should declare on their tax return, not you.

You can have as much in savings as you like. The interest is paid to you net of tax. If you have a massive amount of savings and the interest earned puts you into a high tax band then you need to declare this. But if your salary is £15k you would have to earn about £25,000 per year in interest on your savings before this happened.

So-as long as the savings are in my name, it's irrelevant if DH is a higher rate tax earner?

Would I be better off with just a high interest savings account then, than an isa? Say I want to invest my £6000 and save £100 a month?

Yes of course it's irrelevant what your dh earns - you are two individuals! In the old days couples were taxed together, but this hasn't happened for years
.

Thank you-sorry for being so totally clueless!

If DH hypothetically earnt just under the higher rate tax bracket cut off, would having £6000 in a joint savings account have any affect on his tax? Would it push him up into the next tax bracket, even though he wasn't actually earning much from it?

Hmm-I've been looking and it seems to my (admittedly clueless) brain that if you are a basic rate tax payer, your savings are taxed at source unless the interest on your investment (not the actual investment) takes you into the higher rate tax bracket (currently £41,865).

So, if DH were to earn £39,000, he's unlikely to earn over £2000 in interest from the £6000 whilst it sits in the joint savings account, in the time it takes me to open an ISA in my name.

Have I surmised correctly!?

Yes - the investment isn't the income - the interest is and is what gets added to your salary to possibly put you into the next tax bracket.

everyone pays tax on savings, once your total income is over the tax threshold.

if your income is under that, get a current account paying 3,4 or 5% (look around) and fill in an R85 to get the interest tax free.