Interest paid annually, So what happens if I dont wait untill that date?

kremmen

Hi,

I have an ISA that has a reasonable interest untill november and then it goes down. Interest is paid annually but not untill March 2012 .If I transfered the money into a better rate ISA after november but before march do I still get my interest?

Paul

opinions4u

Yes, you do.

Azrael_1701

The interest would be calculated up until the day that you withdraw, but will still not be paid until the anniversary date.

System

Yes, the interest is calculated on a daily basis and added to the closing balance which will all be transferred to the new ISA account on the date of transfer.

kremmen

Thanks.

Paul

jennifernil

kremmen wrote: »

Hi,

I have an ISA that has a reasonable interest untill november and then it goes down. Interest is paid annually but not untill March 2012 .If I transfered the money into a better rate ISA after november but before march do I still get my interest?

Paul

I think it would depend on where you moved it to.

For example, with Halifax, if you transfer from one Direct ISA Reward to a different issue of the same account, the interest would still be earned, but would not be added until the normal date.

But if you transferred out to a different bank, your account would be credited with the interest on the transfer date.

dazeruk

kremmen wrote: »

Hi,

I have an ISA that has a reasonable interest untill november and then it goes down. Interest is paid annually but not untill March 2012 .If I transfered the money into a better rate ISA after november but before march do I still get my interest?

Paul

You'll get your interest, but when depends.

On some ISA transfer forms you can ask just for the balance to be transferred or both balance plus interest.

So if you asked just for the current balance to be transferred you'll get the interest in March. If you asked for balance plus interest you'll get the interest paid at the date of transfer and moved to the new ISA with the balance.

Azrael_1701

dazeruk wrote: »

You'll get your interest, but when depends.

On some ISA transfer forms you can ask just for the balance to be transferred or both balance plus interest.

So if you asked just for the current balance to be transferred you'll get the interest in March. If you asked for balance plus interest you'll get the interest paid at the date of transfer and moved to the new ISA with the balance.

Surely that would mean that you would be earning interest on more than your tax-free allowance in the new account though..? (assuming that the full years allowance has been invested)

jennifernil

I don't see a problem with that.

If the ISA in question is coming to the end of a particular interest rate, it probably means it has been open 12 months anyway.

A few banks have changed from paying the interest on the anniversary of opening to paying it on a fixed date.

Azrael_1701

jennifernil wrote: »

I don't see a problem with that.

If the ISA in question is coming to the end of a particular interest rate, it probably means it has been open 12 months anyway.

A few banks have changed from paying the interest on the anniversary of opening to paying it on a fixed date.

Okay, let me describe an example and tell me what you think...

I put 5340 in an ISA paying, say, 3%, the interest payout date is on the aniversary(ignoring fiscal year start/end, lets say i opened 1st january just to make it simple)

After 6 months I decide to swap it to another ISA paying, say, 3.2%, and elect to have the balance and interest paid accross.

So, instead of earning 3% for 6 months and 3.2% for six months on the 5340. I end up getting 3% for 6 months on 5340, and 3.2% for 6 months on:

5340 + 1/2 years interest at 3%(around £80.10) = £5420.10

So, in an ISA that contains funds solely from one tax year, I have more than the 5340 allowed invested, which may cause problems from the tax man, as I am earning 3.2% on 80.10 tax free, which I shouldnt be(even though its only something like £2.56).

Funkyfreddy

Azrael_1701 wrote: »

...

So, in an ISA that contains funds solely from one tax year, I have more than the 5340 allowed invested, which may cause problems from the tax man,.....

No - you have still only subscribed £5,340 of "new" money to the ISA from an external source in the tax year April to April - interest earnt is irrevelant.

FF