Compound interest on cash isa's?

sparkys_machine

Hi Folks

First time question on the forum, - so please be nice...
With regards to interest gained in a cash isa, if you leave the interest
in the account, say £110 on a typical years saving of £3600 at 3% - will
you get 3% interest on your £3710 in the next tax year or will you still
only gain on the original £3600?

Sorry - this is probably a really simple one, - just can't seem to find the answer anywhere.

KingL

Hi and welcome

It's compounded and moreover you can leave it in the tax wrapper for years and years - tax free interest on tax free interest on tax free interest, etc


edit : keep a watch on the interest rates - variable rates will plummet pretty quickly - you may need to transfer it around to follow the decent rates

.

alastair_h

KingL wrote: »

edit : keep a watch on the interest rates - variable rates will plummet pretty quickly - you may need to transfer it around to follow the decent rates.

If you do have to transfer to a new ISA provider to get a better rate, just remember to transfer correctly (fill in a form and send it to current isa provider), never remove the funds from the ISA account or you loose the tax free status on your savings.

sparkys_machine

Thanks for the heads up gents. I was keeping full £3600 in, drawing the
interest every time new isa allowance came into play, oh well - you live and you learn. Transfered two previous years into Saffron Walden 2 year fixed at 3.3. Was super tempted by Newcastle's 5%, but worried that the crossover would take too long. Hopefully someone else will reveal a 5% rate within the next year, these 3 percent rates are getting mega boring.:cool:

freddysmith

You should have gone for the Newcastle's 5% ISA, it would normally take 30 days or less to complete the transfer. Even if you lost 30 days (should be much less) interest you would have caught that back after a few months.

pinkneonmartini

3%???? you're lucky, i'm officially getting 0.9% on my lloyds cash isa but now that i am debt free (as of yesterday) i will hopefully get round to moving it somewhere decent lol

oh and back in April, i earned a whacking 0.1% on my £1500 stash lol how pants is that?

Jonbvn

pinkneonmartini wrote: »

3%???? you're lucky, i'm officially getting 0.9% on my lloyds cash isa but now that i am debt free (as of yesterday) i will hopefully get round to moving it somewhere decent lol

oh and back in April, i earned a whacking 0.1% on my £1500 stash lol how pants is that?

So why didn't you transfer to a better cash ISA?

pinkneonmartini

honestly ..... i didn't really know how it all worked, but now i know i can start to move stuff around