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

jennifernil

I don't think HMRC will be bothered. It is only the original deposit that is restricted to the amount allowed in that tax year.. You can be paid as much or as little interest as the provider is willing to pay.

As an example.....

I have a Halifax Direct ISA, mine is from a transfer in, but this is irrelevant for the purpose of how the interest is paid.

I opened it on December 16th 2010, suppose I had done this by depositing my 10/11 allowance of £5100. Halifax pay their ISA interest on 5th April, so I was then paid say 3% interest on my £5100 for the period 16/12 till 05/04, which is £46.11, so now I have £5146.11. My year ends on 15th Dcember and my rate will drop to 0.1% or something, so I need to move my money.

I request a transfer to another povider, Halifax will add my interest from 6th Apil to 15th December, 3% on my balance of £5146.11, which is £107.01, so now I have £5253.12.

Why would HMRC have a problem with that? They are only interested in the new money you deposit.

System

Not wanting to overcomplicate things, because the OPs original question seemed straight forward

But...

jennifernil wrote: »

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.

jennifernil : What you have described above is not in fact an official "ISA Transfer" as such, but is a facility that Halifax seem to have adopted to allow their customers to reclassify their existing Cash ISA account with the latest available account issue and therefore interest rate. This is to retain the business of that customer and is not part of the ISA Transfer rules since no transfer took place.

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.

daveruk : Personally I have never seen the type of transfer form that you have described. And, I cannot see a good reason for leaving the interest in the old account, it would be illogical. If you have decided to move the "balance" to a better interest rate account, then why would you want to lose the compound interest that could be earned at the higher rate, on the interest that you suggest to leave in the old account ?

As an aside...remember that if current year's subscriptions are transferred, then the old account is closed as part of the transfer, so obviously in this type of case, the interest must also be calculated and transferred too.

Azrael_1701

jennifernil wrote: »

I don't think HMRC will be bothered. It is only the original deposit that is restricted to the amount allowed in that tax year.. You can be paid as much or as little interest as the provider is willing to pay.

As an example.....

I have a Halifax Direct ISA, mine is from a transfer in, but this is irrelevant for the purpose of how the interest is paid.

I opened it on December 16th 2010, suppose I had done this by depositing my 10/11 allowance of £5100. Halifax pay their ISA interest on 5th April, so I was then paid say 3% interest on my £5100 for the period 16/12 till 05/04, which is £46.11, so now I have £5146.11. My year ends on 15th Dcember and my rate will drop to 0.1% or something, so I need to move my money.

I request a transfer to another povider, Halifax will add my interest from 6th Apil to 15th December, 3% on my balance of £5146.11, which is £107.01, so now I have £5253.12.

Why would HMRC have a problem with that? They are only interested in the new money you deposit.

In that situation you are spreading it accross two tax years though, so !!! soon as your interest is paid, you have that available to invest.?

Funkyfreddy

Azrael_1701 wrote: »

In that situation you are spreading it accross two tax years though, so !!! soon as your interest is paid, you have that available to invest.?

??

Not sure what you are trying to get at - interest earnt at any time on the balance of a Cash ISA is irelevent to your Cash ISA allowance in any given tax year.

Your only restriction is that you cannot subscribe - fund, deposit - call it what you want any more than your allowance, £5,340 in the current 2012 Tax Year from an external source; that is add new money !

You seem to be complicating matters.

FF

jennifernil

BAA1 wrote: »

Not wanting to overcomplicate things, because the OPs original question seemed straight forward

But...




jennifernil : What you have described above is not in fact an official "ISA Transfer" as such, but is a facility that Halifax seem to have adopted to allow their customers to reclassify their existing Cash ISA account with the latest available account issue and therefore interest rate. This is to retain the business of that customer and is not part of the ISA Transfer rules since no transfer took place.

Yes, I do realise that, but as the OP gave no details oif which bank or which account, or of their understanding of a "transfer", I thought it might be an idea to cover other possibiliuties.

jennifernil

Azrael_1701 wrote: »

In that situation you are spreading it accross two tax years though, so !!! soon as your interest is paid, you have that available to invest.?

Erm.......????

Your example was also over 2 tax years.

Unless you open an ISA on precisely 6th Apil, it is bound to be open over 2 tax years, but that is irrelevant anyway.

Other than the tax free status of the interest and the limit on the new money paid in, an ISA operates just like any other savings account, so why should how interest is added be any different?

Some accounts add interest on every anniversary of opening, some on a fixed date, some even let you choose the date. It will all be in the T&Cs.

If an ISA is transfered to a different bank, the old ISA account is closed, so that bank cannot hang on to your interest, where would they put it?

dazeruk

BAA1 wrote: »

daveruk : Personally I have never seen the type of transfer form that you have described.

You need to get out more!!

BAA1 wrote: »

And, I cannot see a good reason for leaving the interest in the old account, it would be illogical. If you have decided to move the "balance" to a better interest rate account, then why would you want to lose the compound interest that could be earned at the higher rate, on the interest that you suggest to leave in the old account ?

I didn't suggest doing this, just stated it was an option.

RollDeep

jennifernil wrote: »

If an ISA is transfered to a different bank, the old ISA account is closed, so that bank cannot hang on to your interest, where would they put it?

That is what I would like to know. I want to transfer from my Lloyds ISA to a new Northern Rock ISA but I want to know what will happen to my interest!

jennifernil

It will be added by Lloyds at the point of transfer to Northern Rock.

I have transferred ISAs several times, interest was always added first.

(Check to see if there is anything to tick on the transfer form regarding interest, just in case there is a choice.)