Isa Advice

SJV_2

Hello Money Savers!

I have just received a letter from Barclays where i have put in the maximum of £3,600 in cash and wanted some advice. Here is the main part of the letter

"As you may know, the current tax year ends on 5 April 2009, and we'd like to remind you of the ISA Scheme Rules set by HM Revenue & Customs.

If you have subscribed to your cash ISA this tax year (2008/09), you will not be able to subscribe to another cash ISA in the next tax year (2009/10) if you continue to subscribe to this cash ISA in the next tax year. The 2009/10 tax year runs from 6 April 2009 to 5 April 2010."

Is this correct? I thought i was able to open a new ISA every year keeping the old one or transfering it for a better rate.

As i have said i have put £3,600 in a Barclays ISA (which was Martins top pick at the time) and have another £3,600 ready to invest this year.

Any advice would be very much appreciated.

Lokolo

You are correct. As long as you do not deposit further monies into the Barclays one in the new tax year you can open a new one.

SJV_2

Right OK. So what they mean by "Subscribe" is add money to the current ISA in the next tax year. The way i read it was that i couldn't open another. My bad. I think they confuse me on purpose at times.

littlemrtinkle

Right OK. So what they mean by "Subscribe" is add money to the current ISA in the next tax year.


Correct you can open another as long as you don't put any money in old isa

SJV_2

So am i right in thinking my next step should be to find out who is offering the best rate in the new tax year. transfer the current ISA (if possible) and then add my new £3,600 entitlement to it?

Baldur

SJV wrote: »

So am i right in thinking my next step should be to find out who is offering the best rate in the new tax year. transfer the current ISA (if possible) and then add my new £3,600 entitlement to it?

Your choice, transfers can take place at any time (they are independent of the limitations of the tax year) you could transfer your current ISA to a new provider that accepts transfers now and then pay your 2009/10 allowance into it from 6th April or you could pay it into a totally different ISA (e.g. Barclays Golden ISA, which does not allow transfers).

SJV_2

Baldur wrote: »

Your choice, transfers can take place at any time (they are independent of the limitations of the tax year) you could transfer your current ISA to a new provider that accepts transfers now and then pay your 2009/10 allowance into it from 6th April or you could pay it into a totally different ISA (e.g. Barclays Golden ISA, which does not allow transfers).

Thank you!

vickisprings

(1) I am planning to open an ISA this year (2008/2009) and to place my full allowance of £3600 in there. In 2009/2010, I want to open another ISA (for personal reasons, I want to have separate ISAs).

Can I split my 2009/2010 allowance between the old 2008/2009 ISA and the new ISA, so long as the total does not exceed £3,600? Or does the allowance have to be paid into one ISA only?

(2) If I place £3600 into an ISA at the start of the tax year, and get monthly interest, that means my balance will go above £3600. Does the interest you earn count as part of your allowance, in which case I will have gone over the limit of £3600, so what happens? Or does the £3600 limit only apply to money you put in, not money you earn from interest?

Thanks

alastair_h

vickisprings wrote: »

(1)Can I split my 2009/2010 allowance between the old 2008/2009 ISA and the new ISA, so long as the total does not exceed £3,600? Or does the allowance have to be paid into one ISA only?

(2) If I place £3600 into an ISA at the start of the tax year, and get monthly interest, that means my balance will go above £3600. Does the interest you earn count as part of your allowance, in which case I will have gone over the limit of £3600, so what happens? Or does the £3600 limit only apply to money you put in, not money you earn from interest?

1. No you can't do that you would be effectively contributing to 2 isa's in a financial year.

2. Yes the balance will go above £3,600. No the interest does not count towards your contribution. Yes £3,600 limit is only a limit for your contribution.

Baldur

vickisprings wrote: »

(1) I am planning to open an ISA this year (2008/2009) and to place my full allowance of £3600 in there. In 2009/2010, I want to open another ISA (for personal reasons, I want to have separate ISAs).

Can I split my 2009/2010 allowance between the old 2008/2009 ISA and the new ISA, so long as the total does not exceed £3,600? Or does the allowance have to be paid into one ISA only?

As per alastair_h's reply- see HMRC ISA leaflet - http://www.hmrc.gov.uk/leaflets/isa-factsheet.htm

Investment limits
For cash ISAs, an individual can invest up to £3,600 a year, and can only invest with one provider in any one tax year.

(2) If I place £3600 into an ISA at the start of the tax year, and get monthly interest, that means my balance will go above £3600. Does the interest you earn count as part of your allowance, in which case I will have gone over the limit of £3600, so what happens? Or does the £3600 limit only apply to money you put in, not money you earn from interest?

Interest earned in an ISA is irrelevant to the annual allowance - that's the whole point of having Cash ISAs, so that you can build up an ongoing 'pot' of savings earning tax-free interest.

vickisprings

Thanks for the advice!