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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am retired and have a basic income of about £9,500, plus

Resolved Question:

I am retired and have a basic income of about £9,500, plus about £8,000 income from a £195,000 ISA. I pay about £850 pa to the ISA provider. I keep reading that ISAs are a tax efficient way of saving but I can't get anyone to tell me exactly how. I am aware of the capital gains tax situation, but am I saving any income tax? Do I avoid enough tax to cover the the provider's fees? Is it really worth my while keeping the ISA?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Can you tell me what your date of birth is please. What form does the ISA income take? Is it interest or dividends?
Customer: replied 1 year ago.
11/9/45 Interest is entirely from open ended funds.
Expert:  TonyTax replied 1 year ago.
Thanks. Leave this with me while I draft my answer.
Expert:  TonyTax replied 1 year ago.
In 2015/16, you would pay tax of £880 on £8,000 of non-ISA interest which is only £30 more than your ISA charges. In 2016/17, you will be entitled to a personal allowance of £11,000 so about £9,500 will be used against your pension and £1,500 would be used against your interest were it not in an ISA. In addtion, the first £1,000 of savings income will be tax free in 2016/17. So, if you have £8,000 of interest outside an ISA, £2,500 would not be taxed, £5,000 would be taxed at 10% and £500 would be taxed at 20% so you would pay tax of £600 which is less than your ISA charges. I hope this helps but let me know if you have any further questions.
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