Isa Isa Baby! Everything you need to know before the end of the tax year

21:51Martin Lewis:Well, this goes back to my earlier point. It's not an either or. It's not an either rule. The real question you should be asking is, should I be saving or investing? Which in the ISA world is, should I be cash ISA-ing or should I be shares ISA-ing? Now, the general rule is the longer you're putting money away for and the less that you need that money in the short term, the more you should be looking at investing, because investing, especially in a broad, and we'll be talking to our investment specialist later on this, but in a broad range, like an index tracker or something, will tend to outperform savings.

22:19Martin Lewis:But I'll answer the question asked, because we'll be coming on to that later. Saving, if you're going to pay tax on your savings, and the tax on savings, who pays it is a bit complicated, but in simple terms, you've got your personal allowance. If you've not used that, you won't pay tax. Above that, there's a thing called the starting rate on savings. That's for people with low earned or pension income, but high interest from savings. That protects people who earn in total up to about 18 grand. So it's only for people on income below that, where you also got another savings allowance. And then there's the personal savings allowance.

22:51Martin Lewis:This is one people will know about, where you're a basic rate taxpayer, 20 % taxpayer. You can earn£1 ,000 of interest per tax year from any form of savings and you're not taxed on it. A higher rate taxpayer, 40%, you can earn£500 of interest per tax year without paying tax on it. Crucially, money in ISAs does not count to those allowances. So that's on top of whatever money you've got in ISAs. So if you are going to be putting money away and you are likely to pay tax on your savings, then you may as well put it in a cash ISA because after tax even the top normal savings account won't come close to what you'd earn without tax in a cash ISA.

23:27Martin Lewis:And a cash ISA, as we'll come on to a moment, is just a savings account you don't pay tax on. Tuffy wants to know what's the best ISA rate out there at the moment for Barclays as mine is nearly ready to move, please. OK, so, and Rosie's got it on her computer so I'm going to go there and just do that. Now, look, we're in ISA season. So this is called ISA season from sort of mid-March to mid-May. And that's where rates are changing every day as they're fighting to be top of the best buy table. So you tend to get higher rates and they could even get a bit higher over the next week or two as we move up to that deadline.

24:01Martin Lewis:But of course, then you're getting close to can you administratively get the money in in time? So the top new customer only rate at the moment is a company called Trading212 at 4.68%. This is a cash ISA. 1 % of that is a bonus only for newbies. So if you are not new to Trading 212, you will not get that rate. Similar is with Plum at 4.66%. On the Trading 212 cash ISA, you can't get that rate direct. That's a comparison site rate. So you can get it on most comparison sites. But if you go direct, you'll get a lower rate just to complicate it. And you can't do transfers. So if you're looking for an ISA for new money and transfers or just transfers, a cash ister.

24:44Martin Lewis:There's Moneybox at 4.26 % is the top rate that includes transfers. Minimum£500, maximum three withdrawals a year. These are all easy access. There's also Vida savings. And all of these have little caveats, like you can withdraw a year and lots of things. If you want the top no caveats, the top, you know, you can put money in, you can take it out unlimited. it's Synergy Bank at 4.05%. If you're listening to this on the podcast, these rates are changing sometimes hourly. So I cannot guarantee they'll be there. Now that's easy access. You could also get fixed savings and fixed cash ISAs. Very quickly, Virgin Money 4.22 % is the top fixed rate one year cash ISA.

25:25Martin Lewis:Tandem is also 4.22%, one year fixed. And then for two year fixes, is Tandem is 4.31 % and NatWest is 4.3%. Cash ISA rates, unlike easy access cash ISAs, ones where you can take your money out, where they're beating normal savings at the moment, when it comes to fixed rates, normal savings pay higher rates. But with normal savings, your money is locked away. With a fixed rate cash ISA, they can't lock your money away. So you can actually close it early if you want to take the money out, but there will be an interest penalty for doing so. So if you're the type of person who thinks, I want to lock money away to get a guaranteed rate, but there is a tiny chance I'm going to need that money in the next year or two, then a cash ISA has the benefit that in that emergency case you could get your cash out.

26:06In your opinion, is it worth holding off transferring existing ISAs until the final week of the financial year or the beginning of the next financial year when the rates may be better? Is there a game to play there?

26:17Martin Lewis:I tend to find that ISA transfer rates don't peak as much in ISA season as easy access as new money rates do. There is potentially a marginal gain from holding off a little bit. You might want to wait one more week. After that, it's difficult to tell. I was looking at the pattern. I have a graph that I have on my computer because I'm quite good at things like that, which shows me how the rates moved last year in ISA season. and they did peak almost exactly around the 5th and the 6th of April. But of course, Adrian, past performance is no guarantee of what will happen in future. Oh, I don't know why you still make me laugh after all these years.

27:02You still do. I like it when you do my accent and I like it when you do that one. You like the nerd, yeah.

27:09Martin Lewis:That's the enemy coming out. I sometimes realise what I'm saying and feel like I have to let you know that I am aware.

27:18Martin Lewis:Just a little update, actually. I just got a note from my energy team. The last fix that is cheaper than the energy price cap has just been repriced upwards. So there are now no standalone fixes that are cheaper than the current energy price cap, with the exception of those that are linked packages where, you know, you have to get boiler cover or something like that or broadband with them in order to get that cheap price. But the main standalone deals out there, there are no longer any fixes cheaper than the energy price cap on the back of what's going on today. Now, look, important to state that unlike the price cap that's done on a time lag, the rate at which firms, a bit like we talk with mortgages, the rate at which firms set energy fixes is based on today's prices.

28:01Martin Lewis:So if wholesale rates were to drop again, we could see them come back below the price cap in two, three days quite easily. But I think it is totemic of what's going on at the moment that the option to be able to lock in at a fix and save yourself money compared to the energy price cap has just gone.

28:22Let's do the TELUS, which is what you described.

28:25Martin Lewis:What's the best quid or less you've spent in the last 20 years and why? Just a little bit of light relief amongst everything else. You start, Adrian, if you like. I bought an old book in a house clearance warehouse for a pound last year. Autobiography of footy legend Frank Swift. Blimey, I've got that one. Incredible. When I got home and browsed it, I found that he'd personally signed his name in pen across a lovely portrait photograph of himself in his goalie skin. I would say a pound spent in a second-hand bookshop is always going to be the best pound you ever spend. I like this from Cathy, which I think could beat it.

28:58Martin Lewis:I bought a coat from eBay many years ago for a pound, and when it arrived, I found a£1 coin in the coat pocket. Yeah. Winner. Winner. Winner. I'll do Andy. Bought some knocked-down grape vine plants for 25p years ago. Got lovely vines, grapes and about 12 bottles of wine every year now. Brilliant. Very nice. Michael, 99p pram from eBay. Bought in 2013. Used in productions of the Railway Children and Oliver that year. Cool. Luckily, it was picked up quite close to where we were doing the productions. Andre, I remember several years ago when Ryanair started flying to Porto. They launched 1P flights.

29:35Martin Lewis:My dad quickly snapped up several flights. Oh, I remember those days. We used to have the 1P flight checker on my site by the brilliant Adam Cable, which was a lovely story. He was a user of the site and he just sent me, said, I was just trying to find 1P flights one day, so I built this tool that would scrape all the flight sites and find me all the flights for under a pound. I don't know if you think it's useful. I was like, that's amazing. I'll have it on the site. And we put it on the site in the very early days. It doesn't work in the same way anymore, but yes, it was fantastic. Somebody called Golly Josh said, I bought a mug in a pound shop, plain mug, matte black, 15 ounces, so nice and big, ideal.

30:09Then I went back into the same shop a couple of days later and they were on sale at two for a pound. I call it the story of my life, but still got it.

30:17Martin Lewis:Nick, it was a breakfast I was given of full English for a pound because I was the 20th customer into their cafe. I was well made up. I bought a shopping trolley from Asda a few years ago for a quid. They've got hundreds of them outside for sale. Bargain. I think that's probably the place to leave it.

30:37I think we're moving on to investment.

30:41Martin Lewis:Absolutely. We'll move on. Ed Marshall's a chartered financial planner and independent advisor with Dean Wealth Management. Great to be with you, Martin. Oh, thank you so much. Well, lovely, because you can answer some of the questions I can't answer because I'm not regulated to do so. So that's perfect. OK, Darren says, for a stocks and shares ISA first timer, how should one go about selecting from the thousands of funds available? OK, so let's just do the basics on a stocks and shares ISA. Now, when you're putting money in that, just like I always say a cash ISA is a savings account you don't pay tax on, a stocks and shares ISA is an investment account you don't pay tax on.

31:17Martin Lewis:Normally, when you're investing, there are two main taxes that you would think about. the first and most important is capital gains. That's a tax on profits. And this is really important. A shares ISA, if you're investing, is worth knowing about. So gain on profits is this. If I bought something for£1 ,000 and sold it for£10 ,000, I've made£9 ,000 on it. £9 ,000 is my profit. Now, under the capital gains tax laws, if I bought it yesterday for £1 ,000 and sold it today for£10 ,000, it's£9 ,000 profit. If I bought it 10 years ago for a thousand and sold it today for 10 grand. It's still nine grand profit and it still vests in this tax year.

31:56Martin Lewis:So there isn't this, you get an allowance each year. You do get an allowance each year, but it could be for an investment that you've had for 10 years because it all vests in the current tax year. And because when you're investing, you're hoping for fast growth, but you're also talking about holding it for a long time. It means at the point you do sell, if it's not inside an ISA, capital gains is a real risk because you're only allowed to make£3 ,000 of capital gains tax-free a year. There's also tax on dividends. Those are the payments that companies make each year that can go into your shares and funds.

32:24Martin Lewis:And again, outside an ISA, you can make £500 a year tax-free. Inside an ISA, just like capital gains, it's all totally free of tax. So if you're going to be investing, because the potential tax could be quite significant, a shares ISA can be really worthwhile for you. And it's just the same as an investment account, but it's not taxable. But as for the other bit, which is where to start, I'm going to pass that over to Ed. Where do you get started? Well, if you're going to be invested in stocks and shares, you know you've got to take risk. So you need to know that you're going to be nicely globally diversified, i.e.

32:56you're buying stocks and shares around the world. Don't put all your eggs in one basket. And you want to find a provider that you've got confidence in. So there's lots of providers out there, fund platforms like AJ Bell, like Vanguard. You can buy pre-packaged solutions that will have different risk profiles from the cautious to the more adventurous, or you could just literally DIY the whole thing and just go and pick some funds. But I recommend you get a bit of structure and try and diversify.

33:21Martin Lewis:So let's just go into this. So when we're talking absolute beginners, so exactly as you're saying, spread a basket. We just talk about risk for a second. Now, risk, by the way, people see risk as a negative term. Risk is not a negative term. Risk is a measure of variability. So if something is a high risk, that means there is a good chance it might grow very, very quickly and a good chance you might lose all of your money. That's what risk is about. If you invest in a single company, that is by definition high risk. So when we talk about funds, what a fund does, a fund says we might own chairs in 200 different companies and your investment is a little bit in all of those.

34:00Martin Lewis:They're all added together. And when that all on average moves up and down, you get the move up and down. And an easy way to start that, Ed, would be a tracker fund, wouldn't it? A tracker of the FTSE 100. Yeah, a tracker of an indice, or a tracker of the S &P 500 in the States, or a global tracker. That's not a bad start point for a newbie, is it? That's right. And you want to be more than just the FTSE 100 or the S &P 500. If you look at the MSCI World Index, you've got the world's largest two and a half thousand companies. but then you can buy global tracker funds that will buy even more than those two and a half thousand shares so instead of just 200 different companies try and aim for 5 000 plus different companies and try and buy the world buy market capitalization i.e if the u.s is 60 percent of the world stock market you want about 60 percent of your money in the u.s if three percent is the uk then you want about three percent in the uk and there are managers out there who for as little as 20 or 30 basis points, so 0.2%, 0.3%.

34:57You can just buy the world, and that diversification will help to take risk off the table. You're talking about charges there, because they don't manage these things for free. I mean, we'd better explain about basis points and just how the charges work. So if I say I'm going to put£1 ,000 in a stock and shares, ISA, what kind of charges might I pay?

35:16Martin Lewis:Depends where you're putting it. Now, look, if you're doing it the wrong way... But what's the range? If you're doing it the wrong way, you could be paying 5 % of your initial investment and then 1 % a year, and that will eat away at your investment returns. Now, that tends to be by going direct, if you go direct to the fund itself. So you tend to pay for a platform, and many of the platforms, the execution-only platforms, if you're doing this yourself these days, will wipe the initial charge, because otherwise that's taking your investment away. But then the charge will often, if it's a tracker fund, which is a passive fund it's called, so that's where it follows an index.

35:49Martin Lewis:will stick with the FTSE 100, not as a recommendation, just so people understand that's 100 biggest companies listed on the UK stock market, then it will just try and give you those shares in proportion to their weight on the FTSE 100. And it's doing that under a computer algorithm. And that's a passive fund because it's passively monitoring an index. An active fund is where there is a fund manager paid to make decisions and to try and outperform the market averages. Sometimes they do, sometimes they don't. and because you've got paid people doing research and jobs to try and pick shares for you, their charges would be higher.

36:25Martin Lewis:I think I got that right, didn't I, Ed? Yeah, but just to put into context, the markets are fairly priced every day based upon all of the available information. So if you're buying an active fund based upon the wonderful performance that they've had over the last five years, ask yourself the question, what is it that they think they know that nobody else has spotted? And sure enough, with a lot of active funds, you could be top quartile as in a top performer one year and then crash into the bottom the next. What you're really looking for is stable, above average performance where you're not shooting the lights out, but you're getting a consistent return.

36:58A tracker just helps to take away the fund manager risk and will often be cheaper for you as well in terms of fund costs.

37:05Martin Lewis:So could just give us, I know we have to be careful we can't pick, give us some names of the type. If I wanted, if I wanted to go and get your global 5 ,000 shares and I wanted to buy it in one or two funds, Give me an example. It's an example, not a recommendation, of the type where you would go and what you would do for that. Okay, so as a chartered financial planner, I would go to a firm like Dimensional Fund Advisors and buy 13 ,000 shares around the world. But you're not going to get that direct if you're on an execution-only platform. So just to explain the terms, someone goes to you to be paid, and they pay you to, and these will tend to be people who've got more money, higher net worth individuals, will go to you and they will get advice on planning their investments.

37:44Martin Lewis:Execution only is where you do it yourself. DIY. Correct. And if you're looking to buy those funds as a DIY, execution only, you might be looking at BlackRock. You might be looking at Vanguard. These are the kind of companies that are putting low-cost global tracker funds together. And you can very easily compare their performance. There's a website out there called Trustnet. And Trustnet, it basically uses the analytics software. And you can get in a very impartial way, very simple comparisons between this one fund that might be thinking about and the other. And what you're looking for is that global diversification and relatively low costs.

38:20Martin Lewis:Yeah, I also like boring money as well is a useful one on that. We should probably do some more questions on shares ISA. What have you got, Adrian? Forgive me. With the stock markets dropping daily currently, is it a good time investing in stocks and shares ISA as we go to the new ISA year? Or safer to stay with a cash ISA until things steady out? From Richard in Northampton. So it's always that's the impossible question. Look, if we look back in context and the markets are down as a temporary blip at the moment, this is the perfect time to buy. If we look back in context and they continue to fall, this is the worst time to buy, which is why what most advisors talk about is pound cost averaging.

38:53Martin Lewis:I presume you're a fan of that ad. Yeah, we love it. Pay in each month. And when the markets are down, you see your investment fall. But those units are cheaper in price, which means you get more for your money, which means when the markets go back up, you make a better profit. It helps to take a little bit of risk out of things paying in on a monthly basis. I've just got to say, I mean, there's something about Trump in this time of year because the markets were falling far more heavily this time last year because of the tariffs. But here we are again, markets falling because of the uncertainty with the war with Iran.

39:21Martin Lewis:So you could put a lump sum in now is the answer. And obviously, if you're looking to use up your ISA allowance, one thing you could do is you could put your money in a shares ISA now, but you don't have to invest it straight away. You could hold it in in sort of the equivalent of savings within the shares ISA. And then you could move that into investments over the next year. Right. So you could each month, let's say you put 20 grand in. So each each month you're putting about 15, a little bit more than 1500 in. And this is the point about pound cost averaging. The big thing for beginner investors, what scares them is volatility.

39:52Martin Lewis:If you think of it, investments are always going up and down. So if you look one day to the next, I've just lost. I've just gained. I've just lost. I've just gained. That's not the philosophy. You're putting this in for a long period and you're doing, you know, over five years and you're doing it in a way that you're not going to have to take it out. in an emergency. So you're not going to have to crystallise your loss from an emergency. And that's the money you've got it for. And that's why you put it in every month. So you're sort of riding out those short term fluctuations in the market in the hope that while it's going up and down, overall, on average, it's going up.

40:24Martin Lewis:That's your hope. That's right. Because if you're buying those kind of diversified funds, the peaks should outweigh the troughs. The positive years will outnumber the negative years. Markets spend a lot more time going up than they do going down. It's just that when they fall, they always seem to fall a little bit more quickly Then they might rise again, but you'll always spend more time going up than down So we have a lot more that Ed and I are going to be talking about in the pod extras But I think for now, Ed, if you take a little break Because it's now time to put Adrian to the test I think it's time to play the Mastermind theme tune

41:01Martin Lewis:You've got that sort of grimace on your face Yeah. Do you love or hate it? It's a sigh of resignation. Is this Marmite? No, I like it, but in a masochistic kind of way. OK, all right. So, Adrian, he's got his calculator out. Welcome to Money Mastermind. Adrian, the score stands that you've got 17 right and 34 wrong in this three-option multiple-choice quiz, which means, sadly, I'm afraid to say you are... N-B-R-C. No better than random chance, though, if you get this week's right, you will be beating random chance. This is a crucial week, Adrian. This is your opportunity. So, ladies and gentlemen, on to the question.

41:46Martin Lewis:Adrian has been stepping up his game. He has seen a bank shouting about a 7 % savings rate, and now he thinks he's the Wolf of Wall Street, as opposed to Wolves of Wall Street, which you would never think you were. Don't worry. And then he's muttering, Martin keeps banging on about 4.5 % of Chase. Amateur, I'm on 7%. I'll smash him next time he tries to turn me over in Mastermind. There is just one tiny detail, Adrian. Your account is a regular savings account. You can only put away up to£300 a month and it only lasts for a year. And there are many of these regular savings accounts out there. Still, Adrian is feeling rightly smug.

42:29Martin Lewis:He will put the full£300 in every month for 12 months. Job done. Genius status confirmed. So, Adrian, my question for you, and this is why you need the calculator. When the year is up, roughly how much interest will have been added to your account? At£300 a month, 7 % interest. A,£250. B,£190. C,£130. Just give me those again. 250, 190, 130. So you've got 7 % interest and you're putting£300 a month in over a year. Talk us through it, sir. I'm going to take the... Because obviously there's some compounding going on here. So I'm going to take... I can't possibly... There'll be a sum you can do to calculate what the interest will be.

43:23Well, that's why I said roughly because... Yeah, okay, roughly. Yes, okay, okay. So I'm going to take... I don't know whether it's the right approach, where I'll take the midpoint to halfway through the year, I will have put six times 300 in, which is... 1 ,800. 1 ,800. So I'll calculate the 1 ,800... Hang on a minute, I've confused myself.

43:44Martin Lewis:1 ,800 is the midpoint. Yeah, 1 ,800 is the midpoint, and the interest... Rosie, don't... Rosie's trying to... Don't smile. Rosie was giving stuff away. Look down, Rosie. Rosie, help me, Rosie. No, she can't. She's not allowed. But anyway, I can't work. How do you calculate? I can't. How do you calculate 7 %? So you times it by 1.07%. Yeah, okay. So that's 1 ,900 on 1 ,800 pounds. 1 ,900 exactly? No, it's 126 pounds on 1 ,800. So you would think it would be double. A, 250, B, 190, or C, 130. I think it would be... I think it'd be 250. A. Are you locked in? A was 250. A was 250. Yeah. I'm not looking at Rosie, because Rosie could have helped me.

44:43Martin Lewis:Can we play the uh-uh? Yeah. I'm so disappointed, Adrian. You were doing everything right. I thought you'd got it. In my head, what I was preparing to say in my head was, Adrian, not only have you got the answer right, you've got the answer right for the right reason. OK. You did everything right apart from the answer. Where did the 250 come from? I don't know. I'm tired and stressed and humiliated. You literally just worked it on your calculator and it had given you the answer of 120 watt? 126. And the options are 250. Yeah, but that was on 1800, which is what I'd have halfway through the year.

45:16Martin Lewis:And why did you say what you'd have halfway through the year? I can't remember. That's when I started confusing myself. But that was the genius logic at the start that was exactly right. So, oh. Oh, I see. Have you now got it? So this is the whole point. I get loads of complaints about regular savings accounts because people say, I'm putting in£300 a month. I've got 7 % interest. At the end of the year, I've got£3 ,600 in. I should have£250 worth of interest, but they're only giving me£130 worth of interest. And what I say to them is, but you've not had£3 ,600 in for a year. No. In the first month, you had£300.

45:51Martin Lewis:In the second,£600. In the third,£900. In the fourth,£1 ,200. and actually over the year your average balance is roughly half, which is what you did. So the best way to think about it is I've had an average balance of£1 ,800, I'm getting 7 % interest, there's a little bit of compounding that goes on top of that and that figure you had, that£120 whatever pounds, it's a little bit more than that. The actual answer is£135 that you would have, but I gave you a rough figure of£130. I'm completely lost to whether I should give you the point or not because you did everything right and then you forgot.

46:23Martin Lewis:No, I don't deserve it. You've got your own logic at the start. I don't deserve it. I don't deserve it. I really, really wanted you to get that right. So, over, if you had that, if you put it all in at the beginning... If you put it all in at the beginning, you'd have£252. But you didn't put it all in at the beginning because it was£300 a month, so you'd have roughly half of it. Yet, I assume that was the answer, even though I knew it wasn't. Yeah, I don't quite understand what just happened. Rosie, do you understand what happened? Yeah. Yeah.

46:48Martin Lewis:Right, so we've just finished the main podcast and I'm still somewhat confused and disappointed that Adrian managed to talk himself out of the right answer. Not quite sure how that happened. We've got podcast producer Simon with me. Hello, Simon. Hello, yeah. Congratulations on your singing. Well, you know, you've got to diversify these days. Yeah, well, you know what? You put yourself out there. You know what? And it's great to see that, you know, irrelevant of how much talent you have, you were still willing. Look, weddings, bar mitzvahs, I'm available, guys. Always, always. And I tell you what, it might be the best pound you've ever spent going back to our Telus theme.

47:25Martin Lewis:So now Simon's just sent me some questions. We've still got Ed with us, haven't we? I am here. Ready, ready to go, Martin. So here's what we're going to do. Simon sent me some investment questions. I'm going to do those with you and then Simon's going to do some other ISA questions with me. Hopefully you understand, I understand, Simon understands and everyone listening understands. So let's try and do that. So the first question Elvis is asking, I have£80 ,000 in a cash ISA. can I transfer all of that into a shares ISA? Yes, is the simple answer. Just on the technicals of this, remembering that from April 2027, under 65s will no longer be allowed to put the full 20 ,000 in a cash ISA.

48:02Martin Lewis:They still will be allowed to put it in a shares ISA. So the current rules are you can transfer from cash to shares whenever you want, and you can transfer from shares to cash whenever you want. But from April 2027, if you're under 65, while you'll still be allowed to move from cash to shares, you will no longer be allowed to move from shares to cash. So I've answered that bit. But Ed, for you, if you had someone who was suddenly got 80 grand to put in shares, again, same answer, global, global diversified. Is that your answer? Global diversified. But just think about the volatility you're willing to put up with, i.e.

48:38how much it can fall by as well as how much it can grow by. Because if 100 % global shares isn't for you, maybe you need to balance things out a little bit, get some government and corporate bonds in there, take a bit of risk off the table and get a slightly smoother return along the way.

48:53Martin Lewis:So you could buy gilts, which are basically government short-dated bonds, which have some capital gains tax advantage even outside of an ISA. But you're talking, you could go through, I presume you'd suggest by a fund, would you? A corporate bond fund, that's what you're thinking. Yes, all you buy are multi-asset funds. So there are multi-asset funds out there that might be badged as being cautious. So maybe they've got more government and corporate bonds in there than shares. Going through to balanced, where they might have an even split between the two. Going through to those more adventurous multi-asset funds, where they've got more money in the stock markets.

49:26And all three returns will be correlated. If they're going down, they're going down. If they're going up, they're going up. It's just by how much they fluctuate by along the way. and of course going back to what we said earlier the more risk we take the higher the return should be.

49:40Martin Lewis:I think some people may not know the difference between those assets so why don't we do them quickly? All the different types of assets that we're talking about. Assets are just things that you can put money in. So shares I think people know you own a share you have a share of ownership in a company and if it's a fund you have a share of ownership in lots of companies. So you might own 0.0000001 % of a company and when that company is seen as more valuable its share price goes up And if it's making money, it might give you some of that money in dividends. Talk us through the others, corporate bonds and the other types of assets you were mentioning.

50:10Martin Lewis:Yep. So corporate bonds are loans to companies. So if you're a company and you need to raise money, you could issue more shares. You could go to the bank for a loan or you can issue corporate bonds. Corporate bonds are where they ask the market to lend them money. They promise to pay you back in the future. And along the way, they pay you a coupon or a rate of interest. Exactly the same thing with government bonds as well. whether it's gilts, as you mentioned, lending money to the British government or indeed government bonds around the world, the US government, whichever government it might be.

50:37So those are what we call fixed interest securities. And Martin, you just mentioned short dated. When you buy short dated, high quality bonds, you find that they give you a bit of a return. They don't fluctuate much in value. They are more cautious assets. But a lot of people get confused. They think that all fixed interest securities are safe and they're not. because if you buy long-dated debt, you can find that, well, if I'm not going to get my money back for 50 years, the value of that debt, that guilt, that bond could fluctuate very much like a share would in value. And if you've got a high-yield bond, i.e.

51:09you've lent money to a government or a company who might not be able to pay you back in the future, again, they can be very equity-like with their risk as well. So just be careful what type of fixed interest securities you're buying.

51:20Martin Lewis:And if we're talking, the reason that they will generally be described as lower risk than investing in shares is because you're getting a defined return and you have the first call on that money. So that company would have to be in real trouble for it not to pay you back. But then you need to look at the sort of the strength of the company. There is a big difference between having a corporate bond from a huge multinational and from a very small transitory firm. Yeah. Yes. And so when you're buying into a fund, you might have a thousand different government and corporate bonds in there. So again, you've got that diversification, you spread your risk against a number of different governments and companies.

51:55In the event that one of them goes bust, hopefully you've still got another 999 that are there working for you, providing you that income that gets reinvested to give you growth.

52:07Martin Lewis:Sarah is asking, how long can you leave a balance in a shares ISA without it being invested? I'd like to move some money into my shares ISA, but I'm just learning about investing and not sure what to invest in. Is there any time limit on different providers funds? Well, I mean, some providers don't provide any cash proxies at all. And by that, I mean cash funds. And also, Rachel Reeves in the last budget said that she's looking to make sure that you can't just go buy cash funds within a stocks and shares ISA. From April 2027. Absolutely. So what we're looking at here really is, are you going to buy low risk funds like a short dated, high quality corporate and government bond fund?

52:44just see what's happening with the markets and then perhaps you can go switch that fund into the stock markets when you feel ready but don't try and time the market because if you try and guess whether you think the market's going to go down or go up you're probably going to get it wrong and remember that markets spend more time going up than they do going down so time takes away risk if you're investing and you're planning to leave that money in for a long period of time just get it invested. Maybe you want to drip it in over a year with pound cost averaging that you talked about earlier. But either way, just get the money invested.

53:19Martin Lewis:And then it's worth saying some of the platforms, your Hargreaves, Lansdowne, your AJ Bell, they do actually have savings, not just cash funds, literal savings within their shares ISA, which is a holding account you can leave the money in while you decide. But I do think that's all going to get more difficult after April 2027. So you can probably hold it for a year if you really wanted to, and it should be fine. Any longer than that, it might start to get a bit tricky. Yes. And just to say, I mean, there are so many examples in my professional career where we've heard people say, I'm not going to invest right now because I'm sure the market's going to fall.

53:48So when it does, I'm going to invest and buy cheap. And you know what? The market will have spent another two or three years going up. And by the time it does fall, it doesn't fall back to where it was two or three years prior, which is why we say just invest, get it done. But understand where you're investing and make sure that you understand where those returns are coming from and the level of risk that the fund represents.

54:09Martin Lewis:Of course, if you're investing, you should be debt free. You should have a cash emergency fund. All those things set up. That important matter is it's money that you do not need that you can put away for a long time. And you can see why with what's being said. Because if you need to drag that money out when the market's at the bottom, that's a nightmare. If you can't put it away for a long time, you haven't got that time will, you know, everything spreads out type thing. Sue says, can I transfer a cash ISA into a stocks and shares allowance ISA without it affecting my allowance? Yes, you can, Sue.

54:38Martin Lewis:I don't need, I think we've already done that one. Helen says, my child fund, so it'll be child trust fund, has just matured as I've turned 18. What do I do with it? First of all, well done for asking the question. So Helen, if you've got a child trust fund or a junior ISA, when you turn 18, it is converted into the equivalent adult ISA. So what will happen is you'll now have an ISA with the same firm. And generally, if it was a cash ISA, you'll have a cash ISA with that firm. If it's a shares ISA, you'll have a shares ISA with that firm, if it was a shares child trust fund. The most important thing to understand is what you don't want to do is allow the firm you're with to take the choice by default that you're going to stay with that firm.

55:17Martin Lewis:That it might have been a good junior ISA doesn't mean it's a good adult ISA. So if it's shares and you're looking for shares, you want to find the best place you can put those shares. If it's cash, you want to find the best returns on a cash ISA, and you can do that. I talked to Lynn's show about transferring. you can transfer that mature child trust fund once it's in its grown-up ISA into whatever product you want. So if someone came to you when they were 18 and were assuming they don't need the money, I mean, I'm getting your answers pretty consistent from now, Ed. I know what you're going to say on a shares basis.

55:47Absolutely. But if you need that money in the next two or three years, maybe you need to buy a car, maybe you need a deposit for a house, maybe you're setting up a business, then you might be far better off keeping it as a cash ISA. just know that okay you might earn a potentially lower return but you're not going to lose your capital and that could be important for you in the short term that's absolutely and you could of

56:08Martin Lewis:course let's say you're like you've got 10 000 pounds you could invest five thousand of it and you could keep five thousand in in cash isa or if it's not a cash isa you can move it to a cash isa you have that choice and that flexibility with what you're doing so you don't need to worry about you know it's all one or all the other. Ed that's been absolutely brilliant really appreciate you coming on the show that's Ed Marshall chartered financial planner and an independent advisor with Dean Wealth Management thank you so much mate.

56:38Martin Lewis:Right so they were the they were the questions you gave me for Ed what questions do you have for me Simon? Well yeah I mean it'd be a waste of your talents if we didn't utilize you in this way Martin we might as well do a quick fire round. Okay. So Helen got in touch. What happens if you have ISAs maturing in July? So the fact that your ISAs mature in July, the April deadline is only for new money. If it's maturing, it's already in an ISA, so there's no deadline at all. So when your ISA matures, I'm assuming it's a fixed rate cash ISA, you'll have it in an easy access account. At that point, you should look at what is the best, that's if it's cash anyway, what is the best option for you and move it into whichever ISA is right for you at that point.

57:15Martin Lewis:But there is no deadline effect on that one. Helena got in touch. She wants to know, if I take interest from ISAs on maturity and reinvest in another ISA, do I pay tax on that once I put in a normal current account? Yeah. So, let's remember that when we're talking savings, you don't pay tax on savings. You pay tax on the interest your savings earn. If your interest is earned within an ISA, then it's not taxable. If your interest is earned outside of an ISA, it is taxable. So in what you're describing, you take interest from an ISA on maturity and reinvest in another ISA. So let's say you've got£20 ,000 in an ISA, it's paying you for easy numbers,£1 ,000 interest, you're going to put that£20 ,000, you're going to transfer it to a new ISA and you're going to use the£1 ,000, you're going to spend it.

58:02Martin Lewis:Well, when you take it out, if you're holding it in a non-ISA savings account, then the interest on the£1 ,000, the fact it used to be it was interest before is irrelevant, it's an interest on£1 ,000 in the savings account and any interest you earn on that£1 ,000 because it's being earned outside of an ISA is taxable. Of course, though, it's worth noting that if you've got that£21 ,000, you do have the choice to transfer all of it to a new ISA. You don't have to take the interest. You can keep that interest inside your ISA wrapper and transfer it. So that should work that way. Valley asks, someone asked on air about turning 18 and being able to apply for both ISAs and you said it was possible.

58:40The answer is probably no, but can someone turning 65 do the same thing with£12 ,000 and when they turn 65, another£20 ,000 or is it cumulative, i.e. £12 ,000 then top up with another eight?

58:52Martin Lewis:Now I understand that question, but I think many people listening won't. So that's actually on the back of something I said on my TV show. I was asked, as you can put£9 ,000 in a junior ISA and you can put£20 ,000 in an adult ISA, in the year that somebody turns 18, can they put£9 ,000 in their junior ISA in that tax year before they turn 18 and then after their 18th birth they put£20 ,000 in an adult ISA? And the answer to that is yes, you can. So the question here is, from next year, April 2027, when you will only be allowed to put up to£12 ,000 in a cash ISA if you're 65, but£20 ,000 in a cash ISA once you're 65 and over, could you do both?

59:37Martin Lewis:Well, the first answer is no, because a junior ISA and a cash ISA are separate allowances. Here, we're just talking how much you can put in a cash ISA. As for exactly how the rule works, what we don't yet know is what 65 means. Now, that might seem weird. You know what 65 means. But the rules of who can put money in a cash ISA, who can get the full 20 ,000, I don't know if the rule is going to be that if in that tax year you are going to be at some point age 65 or over, then you can put 20 grand in. In other words, if at the start of the tax year you were 64 and the end of the tax year you were 65, can you put 20 grand in?

1:00:17Martin Lewis:Or is it you can only put 20 grand in from your 65th birthday? So if you therefore at the start of the tax year you could put 12 grand in and then the day you were 65 you could add a remaining 8 grand, we simply don't have clarification on how the rules will work. So I can't answer that question at the moment. It will be one of those two. The simpler option I would have thought would be that in the year that you turn 65, you can put£20 ,000 in because otherwise it gets to be a very complicated system. But that doesn't mean it won't be. What's the next one? So Mark has asked, with cash ices, I know the interest is free from tax and not counted as part of the£20 ,000 but does that money get reinvested in the ISA or do you just take it out and how?

1:01:02Martin Lewis:You have a choice. You can go for an ISA where you take the money out so the money is then paid from the ISA provider to your bank account. It's then in your bank account so it's then taxable. Any interest that you earn on the money they've put in your bank account, not the paying to your bank account because it's coming from an ISA. So this is always, it's quite tautologist to explain. Any money, any interest earned in an ISA is not taxable. If that ISA is paying you interest, that isn't taxable. But if that interest is then put in another account and then interest is paid on top of that interest, because that interest is now just savings in another account, that is taxable.

1:01:38Martin Lewis:So you can ask the ISA provider to pay you interest each month outside of your ISA so you can spend it, or you can ask it to pay it within your ISA so it stays within the ISA wrapper. That's your choice. Not all providers offer those options, but many providers do. So, Christine has asked, with a 212 easy access ISA, is there a penalty if I withdraw some of them? No, that's a trading 212. An easy access ISA simply means you can withdraw money whenever you like without giving notice, just like an easy access savings account. You can take the money out. Whether you can then put it back in within that year and it still count within your ISA limit is another question.

1:02:14Martin Lewis:But that's not what you're asking. So some easy access ISAs do charge you interest penalties if you withdraw over a certain amount of times in a year, let's say three withdrawals a year. Trading 212 doesn't. You can withdraw money whenever you like. You can take your money that you put in that whenever you like without a problem. And Joanne wants to know, I have two cash ISAs coming to the end of an annual term. Can I transfer them to somewhere with a better rate? Yes. I mean, they're within a cash ISA wrapper. You can do what you like within a cash ISA wrapper. You can transfer them to a new provider.

1:02:43Martin Lewis:What I suspect you're asking me is, when my two fixes end, can I move them into another fix? Well, you can, but you might have a problem if the maturity dates are different. So what I would suggest you do is when the first one matures, you open a new easy access cash ISA at the best rate. You don't have to put new money in. You can just transfer to it. You do the one with the top transfer rates. You transfer the money from the first maturing fixed rate ISA. then when the second cash ISA matures you put that money into the same easy access cash ISA now you have both of those money combined in an easy access cash ISA and at that point you could transfer that easy access cash ISA to a nicer fix your problem with doing it all into a fix is often when you're putting money into a fixed rate cash ISA you have to fund it within the first certain number of days so they may not allow you to put the second one in it if you want it all in one place.

1:03:36Martin Lewis:And often if you've got lots of different cash ISAs, it is easier to have it in fewer places because it makes it administratively easier for you to transfer when you need to, to up the rate. And if you've got 10 different ones, you might miss that and therefore you might miss out on some interest. That seems pretty good to me, Simon. I think we're done, are we? Yeah, no, excellent work. Thank you very much. Hopefully that answers all your questions on ISAs. I'm aware we haven't covered the lifetime ISA or the junior ISA. I may well try and get that into next week's pod. So if you've got questions on those, get in touch, martinlewispodcast.bbc.co.uk And that's it for this week.

1:04:09Martin Lewis:We tend to put out a new episode every Thursday and Monday, which is our Question Time podcast, where you get to ask me absolutely anything and everything. Open brackets within reason, close brackets. If you've enjoyed today's, please tell your friends you've been listening to the Martin Lewis podcast. Why not leave us a review and even subscribe? Then your pockets will be pleased with you. And if you haven't enjoyed it, and you've been listening for this long, you've only got yourself to blame. You could have turned it off earlier. Don't come having a go at me.

1:05:03Martin Lewis podcast at bbc.co.uk.

1:05:05Martin Lewis:The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.

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