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Cash Isa And Benefits

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daisya | 21:45 Fri 01st Mar 2013 | ChatterBank
7 Answers
Hi

Not sure where I should post this so trying here. Elderly friend (married) gets help with community charge payments (are these tax credits? not sure), he receives state pension and occupational pension, has a small amount of savings in the bank and that's it as far as I know. I said I thought he would benefit in getting a Cash Isa too so he can gain some tax free interest but he reckons that he will have his benefits cut because of the Isa. I thought not because he's not really going to have loads of money to put in it but I don't want to misinform him when I could be wrong. So would a cash Isa reduce his benefit help at all can anyone tell me please? Many thanks.
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I am no expert but if he's just popping his bank savings into the ISA, it's surely not going to make any difference? ISA rates at the moment are only about 2-3% interest p.a. - so you are right about it being tax free - but it's not going to increase his capital greatly.
Question Author
Hi boxy,

Thanks that what I thought but he is very wary, in fact I said he wouldn't be making much change to what he's got now, it's not as though he has got more money coming in to stash away in an Isa. I need to be clear on this and don't know what to google to find the definitive answer for him.
If he's allowed a certain amount of money in the bank before his benefits are affected, it doesn't matter where it is. Is he paying tax on his savings at the moment? If not - leave it where it is, IMO, if it's not very much.
An ISA is no real benefit to a person who's reached retirement age and who's on a low income as he will not pay tax on his savings anyway.

His savings will or won't affect his benefit wherever he saves it.
Question Author
Thanks for your answers, yes his savings are taxed but apparently not much interest taken so I know what you're saying boxy. It's just that I thought if he (or anyone) doesn't have to pay tax then why do it. His pension is taxed too so I thought why pay tax on savings as well if he doesn't have to. Perhaps I shall leave well alone (me and my advice lol).
If he pays tax and he can find an ISA paying a decent rate (almost impossible imho) , he will be better off and as others have said, it makes not a jot of difference to his benefits ....he will either be above or below the threshold wherever he saves it.
If he does not pay tax, he should ask his bank/building society for the appropriate form to send to HMRC to have his bank /building society pay his interest without tax.
as far as I know you are allowed 16 grand be it Isa or just in your bank account, not a penny more.

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