If I take Cash Isa income to supplement my company pension, will I pay tax on it?

Lisa Vaughan
20 June 2018

Q

When I turn 60, I can start to take my company pension. I’m hoping to use some Cash Isa money to boost my income until I reach state pension age at 67. Will I pay tax on the Isa part of my income?

From
SG/Welham Green

A

You’ll be pleased to know that Isas allow you to withdraw your savings without paying any income or capital gains tax. The amount you’re allowed to put in Isas is capped each tax year, though – in the 2018/19 tax year the overall Isa allowance is £20,000.

If you plan to rely on Cash Isas, make sure you shop around for a good interest rate. Interest rates are so low at present that your savings are not likely to produce much income. See Moneywise’s weekly updated best Cash Isas guide.

I would suggest that you contact an independent financial adviser (IFA) to carry out a review of your circumstances, particularly in relation to your income, savings and tax position. A financial adviser could help you to maximise a tax-efficient income from your savings during retirement.

LISA VAUGHAN Chartered financial planner at Fogwill & Jones

The best Cash Isas

Type of IsaAccountInterest RateNotes
Easy accessParagon Limited Edition Easy Access Isa (Issue 4)1.31%Transfers in allowed
Easy accessShawbrook Bank Easy Access Cash Isa - Issue 41.3%Unlimited withdrawals. Transfers in allowed. £1,000 minimum opening balance
One-year fixed-rate bondBank of Cyprus Fixed Rate Cash Isa1.51%Transfers in allowed. £500 minimum opening balance
Three-year fixed-rate bondAldermore Three Year Fixed Rate Cash Isa1.8%Transfers in allowed. £1,000 minimum opening balance
Five-year fixed-rate bondHodge Bank Five Year Fixed Rate Cash Isa2.25%Transfers in allowed. £1,000 minimum opening balance

Source: Savings Champion, 13 April 2018