Monzo plus ISA ? Is this allowed ?

[whyhavetheygotsomany]

Hi I would really appreciate some advice I have never had savings so I am clueless other than what I have managed to find out online. My daughter has just turned 19 she goes to uni but has a job aswell. She's done so well and has 25k in her monzo account. I have found out that if she earns more than 1k a year in interest she will be taxed on the interest hence she can't put any more money into the
Monzo. So what should she do now with her future savings ? Is she allowed to open an ISA or would that mean she would start to pay tax ? Thanks for any advice.

Well done your daughter. Yes, she could open an ISA and put 20k of her savings into the ISA. That way, any interest on that 20k will be tax free.

You can put 20k into an ISA each financial year without paying tax on the interest.

Yes, IMO she should do this & also make sure the £5k is also in a higher interest account - Monzo has easy access pots earning around 4% I think if she wants to keep it in the same place. Don't let it stagnate in a current account.

Look at he different types of ISA - some are fixed with limited withdrawals, some allow you to take money in & out (flexible) etc.

She won't have to pay tax on any interest earned on money that's in an ISA. She is allowed to save up to 20K per tax year into an ISA.
Well done her - that's a huge amount to have saved!

Thanks for the reply. So just to be clear she can leave her 25 in the Monzo and open the isa for her future savings ?

She would be better putting £20000 straight into the isa when she opens it then putting additional savings into her Monzo, then next April transfer the majority into her ISA. If she leaves tbe £25000 in her Monzo now there is a chance she will earn over £1000 in interest and be taxed on it.
As she is good at saving it may be worth her opening a LISA as well if she plans to buy a house in the future. The government will give her 25% top up up to a maximum of £1000 a year so if she put £4000 of her savings into a LISA now it would have £1000 added in a few weeks time. She could then transfer £16000 to a normal ISA and continue to save in her Monzo and do the same next year.

Yes others are right. She should open an ISA and move £20k in. If she can get near 5% interest, she’d get £800 tax free for this after a year, which is probably more interest than she’d get via the Monzo account?

If she is a lower earner she will get the starting rate for savings interest so may be able to get more interest than £1k without paying tax on it. It's up to £5k extra. Look up starting rate for savings on the gov website for details.

I agree with @rainbowunicorn. £4,000 into a LISA for the government bonus, and £16,000 into the best cash ISA you can find.

Personally I'd go with the Trading 212 cash ISA paying 5.2%. No point earning 4.1% in Monzo when you can get better elsewhere. 1.1% difference on £16,000 is £176 a year more.

Thank you so much.