ISA status after its tax year is over?

edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
1 reply 591 views
gakochangakochan Forumite
64 Posts
edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
Hi, I hope this isn't too stupid a question, but this is something that's been confusing me!

Suppose I open a cash ISA in tax year 05-06 (say) and deposit my £3000 at say X% interest. After April 06, if I keep that ISA open, will it continue to earn interest at X% as the years go by (unless the provider changes its rate), and will ALL that interest remain untaxed?

Or should I close the ISA as soon as April 06 has gone, take the cash+interest from 05-06, and forget all about that ISA?

Again. sorry, if this is a stupid question!

Thanks
Gak
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Replies

  • Kazza242Kazza242 Forumite
    1.9K Posts
    Part of the Furniture 1,000 Posts Combo Breaker
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    gakochan wrote:
    Hi, I hope this isn't too stupid a question, but this is something that's been confusing me!

    Suppose I open a cash ISA in tax year 05-06 (say) and deposit my £3000 at say X% interest. After April 06, if I keep that ISA open, will it continue to earn interest at X% as the years go by (unless the provider changes its rate), and will ALL that interest remain untaxed?

    Yes, it will continue to earn tax-free interest year after year at whatever the interest rate the bank/BS is paying at. The Government have guaranteed that ISA's will remain available until 2010. Keep an eye on the rate your ISA is receiving. You should find this on your providers' website under the 'interest rates' section. If the rate falls, you can approach a new provider and ask them to transfer* your existing ISA with X? to them.

    *Remember to check that the new provider accepts mini cash ISA transfers in.
    gakochan wrote:
    Or should I close the ISA as soon as April 06 has gone, take the cash+interest from 05-06, and forget all about that ISA?

    No, definitely not, as your money will lose it's tax-free status. If you don't need to withdraw the money for anything, then keep it in a mini cash ISA and allow it to continue earning you tax free interest. If you haven't already, you should think about opening/contributing to a mini cash ISA every year. You get a £3,000 cash ISA allowance each tax year and if you don't use it, you lose it. Remember, you can only contribute to one mini cash ISA per tax year, although you can transfer it to another provider. When each tax year begins, you can either continue to pay into your existing mini cash ISA or open a new mini cash ISA with another provider.
    Please call me 'Kazza'.
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