First ISA!!!

david78

flossy_splodge wrote:

Input, I need input! Sorry deemy, don't quite follow....x

I think what deemy means is that you can hold cash in your ISA account but there is a fixed charge of 20% of any interest you earn*. Technically I don't think this is a "tax" -- but the effect is the same, money is lopped off your interest and paid to HMR&C.

The interest rates on cash held this way are not that great either. Much better to hold a bond fund.

---

* Interestingly, there is no charge for holding cash in a PEP.

flossy_splodge

But I thought all Isa investments were free of Tax? I think I need more input please?

cheerfulcat

flossy_splodge wrote:

But I thought all Isa investments were free of Tax? I think I need more input please?

If you have your ISA with a broker, any uninvested cash - the balance of your contribution, dividends and so on - sits in a deposit account. There is some interest paid on this, but the interest is taxed ( it's not called tax, but a tax is what it is - you pay 20% of your interest to the government ).

HTH

Cheerfulcat

flossy_splodge

But why would you leave such decisions to a broker??? Ooops, gonna start a war! I suppose I forget that some people may have more than the current limits of £7000 of savings that can be tax sheltered! Wish I could join you!!

cheerfulcat

But why would you leave such decisions to a broker???

flossy_splodge, many investors have self-invested ISAs with brokers. The broker doesn't provide advice as a rule, just the ISA wrapper. There are times - for instance, when you have sold some shares, or when you have received a dividend - when there is a cash balance in the account. You might even want to be out of the market for the time being, and prefer to hold cash. At such times, the account pays interest, 20% of which goes to the taxman.

some people may have more than the current limits of £7000 of savings that can be tax sheltered!

I should think that most people with a stocks and shares ISA have considerably more than just this year's 7k!

HTH

Cheerfulcat