Understanding ISA's

the2ems

I just don't understand how ISA's work regarding making an investment now, close to the end of the tax year. If I invested the maximum in a cash ISA tomorrow, I'm pretty sure that I wouldn't receive a full years interest in April. Is it just the fact that when April arrives I can then invest a further sum, possibly the max again, so that by April next year I will receive full interest on both sums. So really my investment has only been for 13 months.
I'm not sure if I have explained clearly what I am trying to say, but hopefully someone will understand and tell me if I have it right.

Thanks

jimjames

Yes you only receive interest on the money for the time it is invested. So if you invest now and in April then by next April you will get interest on 13 months worth of money.

blueberrypie

the2ems wrote: »

I just don't understand how ISA's work regarding making an investment now, close to the end of the tax year. If I invested the maximum in a cash ISA tomorrow, I'm pretty sure that I wouldn't receive a full years interest in April. Is it just the fact that when April arrives I can then invest a further sum, possibly the max again, so that by April next year I will receive full interest on both sums. So really my investment has only been for 13 months.

...and for as long as you leave the funds in an ISA.

You continue to earn interest, without any tax liability, for as long as the funds remain in an ISA. Right now you can put £5100 into a cash ISA, and it will keep earning interest for as long as it stays in an ISA wrapper, and you will not have to pay tax on it for as long as it stays in an ISA wrapper.

If you don't pay that £5100 into an ISA before April 5th, you lose not only the ability to earn interest on it during *this* tax year, but in every future tax year.

Funding an ISA early in the tax year does mean you make more interest on it - that's true for any form of savings. But funding one late in the tax year is better than not funding it at all, because you will never again have the opportunity to put that particular tax year's ISA allowance into an ISA.