ISAs: do they ever need declaring on a tax return?

cashferret · 2 September 2010 at 5:41PM

My bank has sent me a tax certificate for an ISA and I shredded it, thinking that I didn't need to mention it on my tax return. I told this to a friend, who said that she believed that you have to put the interest on your self-assessment form.

On the HMRC website, it says:

"Q. What are the tax benefits of an ISA?

A. You pay no tax on any of the income you receive from your ISA savings and investments [...] You do not have to declare income and capital gains from ISA savings and investments or even tell your tax office that you have an ISA."

If you don't have to put your ISA interest on your tax form, why do banks send out tax certificates for them? I'm confused! And worried I am doing something wrong!

Stompa · 2 September 2010 at 5:50PM

cashferret wrote: »

If you don't have to put your ISA interest on your tax form, why do banks send out tax certificates for them?

I've never had a bank send me a tax certificate for an ISA, so am at a loss to know why you've been sent one.

glider3560 · 2 September 2010 at 5:50PM

Who is the bank? They shouldn't send out tax certificates for ISAs. Perhaps it was just an annual statement?

cashferret · 2 September 2010 at 6:25PM

glider3560 wrote: »

Who is the bank? They shouldn't send out tax certificates for ISAs. Perhaps it was just an annual statement?

Hi, glider - no, it was most certainly a tax certificate. They sent me statements as well. I had phoned and requested tax certs for all the a/cs at that bank except for the ISAs, and the guy on the phone asked me if I didn't want the ISA tax certs because accountants want them (or something). I said no because I don't have an accountant and do my return myself but he sent them anyway.

cashferret · 2 September 2010 at 6:26PM

glider3560 wrote: »

Who is the bank? They shouldn't send out tax certificates for ISAs. Perhaps it was just an annual statement?

Oh! Sorry, forgot to say it was the Halifax.

Chadsman · 2 September 2010 at 6:36PM

If you hold cash in a shares ISA waiting to decide in which fund you are going to invest then as I understand it the interest on these funds only is taxable.

This may or may not be correct.

Stompa · 2 September 2010 at 7:15PM

Chadsman wrote: »

If you hold cash in a shares ISA waiting to decide in which fund you are going to invest then as I understand it the interest on these funds only is taxable.

This may or may not be correct.

They call it a 'charge' rather than 'income tax', and it doesn't have to be declared:

http://www.hmrc.gov.uk/isa/faqs.htm#25

Holding cash in the stocks and shares component

Cash may only be held in a stocks and shares ISA to invest in qualifying investments. This includes cash subscriptions, interest and dividends, and proceeds from disposals of qualifying investments that have not yet been reinvested.

The ISA manager may pay interest on this cash while it is held in the account. There is no Income Tax to pay on this interest, but the manager by law must deduct a flat rate 20 per cent charge before crediting it to the account. You do not have to declare this interest on a tax return.

cashferret · 2 September 2010 at 8:51PM

My ISAs are all simple cash ISAs. Weird.

Funkyfreddy · 2 September 2010 at 9:09PM

cashferret wrote: »

Hi, glider - no, it was most certainly a tax certificate. They sent me statements as well. I had phoned and requested tax certs for all the a/cs at that bank except for the ISAs, and the guy on the phone asked me if I didn't want the ISA tax certs because accountants want them (or something). I said no because I don't have an accountant and do my return myself but he sent them anyway.

In the case of an ISA your "Annual Statement", "Tax Certificate" or whatever name you or your Bank/BS give to it it you may well find its a one form fits all type document that is used for various accounts in so much as it has options for Gross Interest, Tax deducted and Net Interest and so on. In the case of your Cash ISA the Gross/Net interest are obviously going to the same.

Regardless I'd don't think its a good idea to shred such documents - you never know when they might be needed.

Ask for a duplicate copy, it shouldn't be too much trouble to get a copy !

FF

cashferret · 2 September 2010 at 9:41PM

Funkyfreddy wrote: »

In the case of an ISA your "Annual Statement", "Tax Certificate" or whatever name you or your Bank/BS give to it it you may well find its a one form fits all type document that is used for various accounts in so much as it has options for Gross Interest, Tax deducted and Net Interest and so on. In the case of your Cash ISA the Gross/Net interest are obviously going to the same.

Regardless I'd don't think its a good idea to shred such documents - you never know when they might be needed.

Ask for a duplicate copy, it shouldn't be too much trouble to get a copy !

FF

Hi FunkyFreddy - no, the tax certificates have "tax certificate" written across the top and on separate pieces of paper are statements labelled "statement", one of each for each account (I hope I am not misunderstanding your point!).

I've always been a bit paranoid about shredding documents in case I might need them but I honestly couldn't see a reason for keeping a tax certificate on a tax-exempt product - nor, indeed, any record that the account had ever existed (I've closed it).

But then my friend's comment about HMRC made me wonder!

So is there any reason to keep a tax certificate for a simple cash ISA? Or any record of it once it has been closed and safely transferred to another bank?

le_loup · 2 September 2010 at 10:21PM

Halifax have been sending "Tax Certificates" for cash ISAs for years.
As long as they show a value of nil, I don't see this as a problem.
I also seem to remember getting them from Principality as well.

ISAs: do they ever need declaring on a tax return?

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