The benefits of transfers to Fixed Rate ISAs
As each tax year emerges, so too do new options for savers who are deciding how they would like to make the most of their financial situation. There are numerous savings options available, from fixed rate ISAs or bonds to standard high interest accounts. For those that opt to save with fixed rate ISAs, there are a number of considerations to be made year on year, which can help to make the most of the savings both long and short term.
Fixed rate ISAs work in such a way that, once a tax years ISA allowance has been funded and reached, it will generate tax free interest for the duration that it is held in the account. This means that if the account holder can survive without the sum in the account, they are able to generate tax free interest at the rate agreed, indefinitely.
If however, a new provider offers a more attractive interest rate for fixed rate ISAs, the account holder is within their rights to transfer a year’s balance into the new account to gain the better rate. If a saver has a fixed rate bond which they would like to gain tax free interest on, they are also able to convert this into fixed rate ISAs. This of course assumes that the fixed rate or term that was agreed upon has expired. It is also possible to stack ISA balances year on year into the same account, so fixed rate ISAS hold more than their limit for a year, by the next tax year, more of that balance will be able to gain tax free interest, by filling the limit for the next tax year.
