ISA question - I'm a bit slow! 31 October 2008 at 3:46AM edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings 4 replies 785 views

truescot

Just want to clear up a point about ISA's.

After sorting my finances out I have started putting £300 a month into a cash ISA, therefore using my annual allowance. Unfortunately I have an ISA with BoS which is a terrible rate. So at the start of next financial year can I transfer the balance from my current ISA into the top interest paying ISA and the whole lot remains tax free? Will my accumulated balance earn the new higher interest or just the £3600 for that financial year?

And basically should you compare rates every April and keep switching to the highest interest ISA?

This has never really affected me before as I never got round to saving!

Baldur

truescot wrote: »

After sorting my finances out I have started putting £300 a month into a cash ISA, therefore using my annual allowance. Unfortunately I have an ISA with BoS which is a terrible rate. So at the start of next financial year can I transfer the balance from my current ISA into the top interest paying ISA and the whole lot remains tax free?

Why wait until the start of the next financial year, if the rate is so bad? You can transfer your Cash ISA at any time.

Will my accumulated balance earn the new higher interest or just the £3600 for that financial year?

The accumulated balance - that's the whole point of Cash ISAs, that the interest (and any interest earned on that interest) continues to be tax-free.

And basically should you compare rates every April and keep switching to the highest interest ISA?

Your choice - this year's 'best buy' can often turn out to be less than the best after 12 months.

RayWolfe

Just to clarify one small aspect of baldur's excellent answers, you may like to consider comparing rates at any time of the year and not just "every April"

Lokolo

RayWolfe wrote: »

Just to clarify one small aspect of baldur's excellent answers, you may like to consider comparing rates at any time of the year and not just "every April"

Just to clarify one small aspect of raywolfe's excellent answer, opening accounts in April can be very annoying as there will be a lot of demand for them, but opening accounts halfway through the year will be a much speedier process!

RayWolfe

What an excellent clarification Lokolo.