£3000 in ISA now?

bren.wright

Hi Guys,

I am looking for a bit of advice, I have sold my car and I am down grading for a couple of months which leaves me with around £13k sat in my current account doing nothing.

I looked into ISA's a while ago but never bothered with it.

As far as I can understand you can put a maximum of £3000 in them per financial year, correct?

What would happen if I put £3000 into an ISA now, would I earn any interest at all in April or has the money got to have been in there for an whole year?

Is there anything else I could do with the money otherwise it will just sit there...

Many thanks

Brendan

black-saturn

Yes if you put £3000 in one now you would earn interest in april. You can put money in right up until 31st march and still gain interest.

grumbler

black-saturn wrote:

... you would earn interest in april...

Just a small correction. You will erarn interest for all the time you have your money in ISA. However, this doesn't mean the interest will be credited in the end of financial year. Different providers add interest at different time. However, if you close or transfer your ISA interest is credited at the time of closure or transfer.

bren.wright

So interest is earned on a monthyl basis as per a normal bank account? The interest being around 5%, which is how much per month??

If I just left the money in my current account will I get taxed on it?

Many thanks

Bren

lindabea

A slight correction - interest will be paid monthly if the account allows interest to be paid monthly, otherwise it will be paid annually. And yes- you will pay tax on all accounts except ISAs

grumbler

bren.wright wrote:

So interest is earned on a monthyl basis as per a normal bank account?

Yes. In fact even on a daily basis if you add/draw money during a month.

The interest being around 5%, which is how much per month??

For 5% AER it is (1+0.05)^(1/12)=0.0407% p.m. The same for 5% gross p.a. with interest paid yearly (callculated still daily).

For 5% gross p.a. with interest paid monthly it is 5%/12=0.416% p.m.

All this is for average monthly rate, which in fact depends on the number of days in the month.

Rikki

If you put £3,000 into a cash ISA now before 31st March tax year 2005/2006. You can put another £3,000 in after the 5th April tax year 2006/2007. This will give you a total of £6,000 worth of savings all tax free.

tomstickland

Also don't keep the remainder of the £13K in a current account, move it to a savings account paying the best rate you can find (around 5%) ASAP.

tanith

is there a limit to what can be put into an ISA or can u just keep adding £3000 per year for as long as you like?

tomstickland

AFAIK you can open a new £3K ISA every year.

MoneyMonkey

I could be talking nonsense here (so feel free to abuse me!), but I thought that the limit for a mini cash ISA was 3K. Also that you can have 3 mini ISAs (1 of each type - cash, stocks, life assurance), so long as they total no more that 7K.

However, a maxi ISA (of which you can onely have one), can have upto 7K in any combination. Therefore can you not put 7k into a maxi ISA, but only have it in terms of a cash holding?

MM.