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Overpay into ISA

username__5
username__5 Posts: 13 Forumite
in Savings & investments
Basically I have taken out an ISA with HSBC. I have put £2000 in now and am going to be paying £300 each month. The tax free limit is £3600 I am worried because by April there will be £3800 in there. Should I be worried about this are there tax implications? Also If interest is being paid into the same account the that will also push the yearly to above £3600. I am not sure what is what. Should I concern myself with this or not?

Kind regards

Dave

Comments

  • Renter01
    Renter01 Posts: 17 Forumite
    If you over pay into an ISA by Standing order you may find the last payment that puts it over is rejected anyway, thats what would happen at my work.

    However if it is accepted you will most likely receive a tax bill next year for the interest earned on the over payment.

    I knew a lasy who paid into 2 ISA's without thinking and a year later she got a tax bill for the interest she should have paid
    :rotfl::rotfl::rotfl::rotfl::rotfl:
  • Renter01
    Renter01 Posts: 17 Forumite
    username_ wrote: »
    Basically I have taken out an ISA with HSBC. I have put £2000 in now and am going to be paying £300 each month. The tax free limit is £3600 I am worried because by April there will be £3800 in there. Should I be worried about this are there tax implications? Also If interest is being paid into the same account the that will also push the yearly to above £3600. I am not sure what is what. Should I concern myself with this or not?

    Kind regards

    Dave


    Also, the interest paid on an ISA is not counted as part of your allowance :)
    :rotfl::rotfl::rotfl::rotfl::rotfl:
  • Baldur
    Baldur Posts: 6,565 Forumite
    username_ wrote: »
    Basically I have taken out an ISA with HSBC. I have put £2000 in now and am going to be paying £300 each month. The tax free limit is £3600 I am worried because by April there will be £3800 in there. Should I be worried about this are there tax implications? Also If interest is being paid into the same account the that will also push the yearly to above £3600. I am not sure what is what. Should I concern myself with this or not?
    The interest is the tax-free bit, so naturally increases the capital deposited in the ISA - that's the point of having a Cash ISA.

    Any funds above your annual £3,600 which you attempt to pay into your ISA should be rejected by the ISA manager, to prevent overpayment but why not just pay less into the account in March?
  • username__5
    username__5 Posts: 13 Forumite
    Thank you so much for the quick reply! Explained very well thanks!
    I can't find the DD/SO function in my internet bank account I assume because I haven't started paying into it yet. With your ISA's is it by DD and can you adjust it monthly if you want?

    Just so I'm 100% on the interest thing if by the time I have fill my ISA £3600 near April say with the interest earnt over the few months will it be rejected if it is not bang on £3600? Not sure if I am making sense. Compound interest is very hard to calculate!

    Thanks again

    Dave
  • Baldur
    Baldur Posts: 6,565 Forumite
    username_ wrote: »
    Just so I'm 100% on the interest thing if by the time I have fill my ISA £3600 near April say with the interest earnt over the few months will it be rejected if it is not bang on £3600? Not sure if I am making sense. Compound interest is very hard to calculate!
    No - forget about the interest, that's the bit which is tax-free.

    You just have to ensure that you don't pay more than £3,600 of new money (capital) into the ISA.
  • innovate
    innovate Posts: 16,217 Forumite
    10,000 Posts Combo Breaker
    username_ wrote: »
    Just so I'm 100% on the interest thing if by the time I have fill my ISA £3600 near April say with the interest earnt over the few months will it be rejected if it is not bang on £3600? Not sure if I am making sense. Compound interest is very hard to calculate!

    Think it was already explained, you can deposit £3,600 per tax year. You do not need to worry about the interest.

    The tax year after, you can deposit another £3,600 (unless the max amounts get changed by the Chancellor). And so on.

    Just watch out that you don't go over the £50K compensation limit - which includes any interest you accrued. Open another ISA with another bank well before you get near that limit.

    Hope that makes sense.
  • username__5
    username__5 Posts: 13 Forumite
    Awesome thank you very much. Really has helped me out!
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