Interest on ISAs and opening new account

Kodos84

Hi,

I have some money in an ISA with Natwest but havn't paid anything into it this tax year. Then I noticed that A+L have a much better interest rate on their e-saver, so I opened this one last week with a view to transfer the Natwest balance into it and put in some more savings.

1) I think I have made a mistake because I havn't yet transferred the Natwest balance accross and have put some savings into the A+L account. What will happen? Will I end up paying tax?

2) How is interest calculated when it is paid monthly? For example, the NW ISA pays 5.5% and I expected it to pay 1/12th of the balance x 5.5% each month but it's closer to 4.4%.

3) The A+L ISA says "Earn 6.50% AER (variable) (including bonus) with an eSaver, on balances between £1 - £500,000" for the first year and there is an online calculator to work out interest earned. I put in the balance, said I was a tax payer and wanted interest monthly. It said the net monthly interest was 5.05%, why is it not 6.5%?

4) I understand that with ISAs you can invest £3600 into a cash one each year tax free. Do you pay tax on the interest tho? Do other investments tax you on the amount you pay in as well as the interest/profit made? E.g. you don't pay tax on the money you put into a current account but you do pay it on interest earned.

Thanks for any help.

Quietgirl

Hi, I hope you are mixing the 2 accounts up. It's the EIsa you want not the ESaver. If you put your money into the Esaver you will lose that years allowance so open the EIsa and transfer the money from Natwest into that.

Kodos84

Sadly not, I was so distracted by the 6.5% rate that I didn't notice it was different to the eISA. Only thing I can do now is do a transfer request from this account to another ISA, looking at transferring both the NW and this new AL ISAs to an Icesave ISA. Can anyone see anything wrong with this? What have I lost by making this mistake?

Kodos84

Quietgirl wrote: »

Hi, I hope you are mixing the 2 accounts up. It's the EIsa you want not the ESaver. If you put your money into the Esaver you will lose that years allowance so open the EIsa and transfer the money from Natwest into that.

I just phoned A&L, they said the eSAVER is not an ISA and I was allowed to take the money out to put into an ISA, which would then use this years allowance, so that's what I have done.

cheerfulcat

Kodos84 wrote: »

4) I understand that with ISAs you can invest £3600 into a cash one each year tax free. Do you pay tax on the interest tho? Do other investments tax you on the amount you pay in as well as the interest/profit made? E.g. you don't pay tax on the money you put into a current account but you do pay it on interest earned.

" Tax free " refers to the interest. The initial deposit has normally either already been taxed ( employment income, for example ), or was not taxable.