Suggest a saving product please

Lokolo

CYPER wrote: »

I don't really understand this. All these money has came from my job, so I have already paid tax on them. How many times am I supposed to pay tax on them? How do banks and/or HMRC know that a set amount of money have already been taxed?
Do you mean than if I take them out of the ISA account I have to pay taxes on the interest earned only?

Yes thats what he means. Interest earned from that money from the day you take it out of the ISA will be taxable (hence why you should always keep it in there if you can)

Baldur

CYPER wrote: »

I don't really understand this. All these money has came from my job, so I have already paid tax on them. How many times am I supposed to pay tax on them? How do banks and/or HMRC know that a set amount of money have already been taxed?
Do you mean than if I take them out of the ISA account I have to pay taxes on the interest earned only?

You pay tax on any interest earned by that money, if you place it in any subsequent non-ISA account - not when you actually withdraw it.

If you leave the annual capital + ongoing interest in a Cash ISA account it remains tax-free for as long as ISAs (or any replacement product) last. Many of us probably have well in excess of 40K earning tax-free interest in Cash ISA accounts, if we have used each year's allowance since the scheme began

CYPER

Lokolo wrote: »

Yes thats what he means. Interest earned from that money from the day you take it out of the ISA will be taxable (hence why you should always keep it in there if you can)

Call me stupid, but what is the point of it then? The only place where you pay no tax on the interest is in the ISA. If you want to use them to buy something then you must pay tax on the money first. So sooner or later you do pay tax on the interest, otherwise you keep it in the ISA forever. It makes no sense to me to call it tax free. What am I missing?

CYPER

Baldur wrote: »

You pay tax on any interest earned by that money, if you place it in any subsequent non-ISA account - not when you actually withdraw it.

So I withdraw the whole amount from the ISA to my current bank account, because I want to buy let's say a car. And I have to pay tax on the earned interest, before I can make the purchase? :eek:

Aegis

CYPER wrote: »

Call me stupid, but what is the point of it then? The only place where you pay no tax on the interest is in the ISA. If you want to use them to buy something then you must pay tax on the money first. So sooner or later you do pay tax on the interest, otherwise you keep it in the ISA forever. It makes no sense to me to call it tax free. What am I missing?

You don't accrue a tax bill within an ISA. If you take it out and spend it in the same day, you don't pay any tax on the interest earned. It's only if you take it out and put it in another savings product that you start to pay tax as normal on the interest for that savings product only.

Aegis

CYPER wrote: »

So I withdraw the whole amount from the ISA to my current bank account, because I want to buy let's say a car. And I have to pay tax on the earned interest, before I can make the purchase? :eek:

In a word, no.

CYPER

Baldur wrote: »

Sorry, can't be bothered with calculations at the moment, especially as rates are likely to have changed (unless you have a fixed-rate product) but you'll have e.g. interest on £3,600 from date of deposit to 5th April 2009 then, assuming that you deposit next year's £3,600 on 6th April, you'll have a full year's interest on £7,200, plus the interest earned from now until 5th April 2009, by 5th April 2010.

What happens with the interest earned in the period present-04.2009? I believe I earn interest again on it in the period 04.2009-04.2010?

CYPER

Aegis wrote: »

In a word, no.

That sounds more reasonable and that's what I think is correct. Maybe my assumptions on what you guys have written are wrong.

Baldur

CYPER wrote: »

So I withdraw the whole amount from the ISA to my current bank account, because I want to buy let's say a car. And I have to pay tax on the earned interest, before I can make the purchase? :eek:

No, any interest earned in your current account will be taxed at source, e.g. if you earn £5 gross interest, the bank will deduct the tax at 20% and give you £4 net of tax.

CYPER

Aegis wrote: »

You don't accrue a tax bill within an ISA. If you take it out and spend it in the same day, you don't pay any tax on the interest earned. It's only if you take it out and put it in another savings product that you start to pay tax as normal on the interest for that savings product only.

Ah now I get it. Basically if I put the earned interest from the ISA in a non-tax free savings account to earn interest from it, then I pay tax on that new interest. (what a complicated sentence - I hope it makes sense to you )