Non-taxpayer ISA question

earthlover

If a non taxpayer closes an ISA account in order to open a better rate ISA is tax deducted if they did not have a R85 form for the account?

Or is no tax deducted from ISAs on closure anyway?

psychic_teabag

No tax is deducted from an ISA.

keiran

But interesting point, though....

If one is a non tax payer, is there ANY benefit in using ISAs?

Quite often, the interest rate on fixed term bonds is higher than that on ISAs!!

redmalc

Keiran your comments are interesting,my wife is retiring in a few months and i have decided i can get better rates of interest given her situation.

earthlover

Kieran, Redmalc,

I asked because in this case the isa holder is a poor pensioner not likely to ever become a taxpayer unless they win the lottery.

You would have to weigh up if you/your wife may in the future be likely to become a taxpayer.

datostar

keiran wrote: »

But interesting point, though....

If one is a non tax payer, is there ANY benefit in using ISAs?

Quite often, the interest rate on fixed term bonds is higher than that on ISAs!!

My wife is a non-taxpayer and uses a savings account with R85 for tax-free interest. If I was to pre-decease her she would most definitely be a taxpayer on the widow's pension she would get along with her existing State Pension. She therefore also has fixed-rate Cash ISAs which do pay higher rates than instant access accounts.
It's all a matter of individual circumstances, I think. If a non-taxpayer is never likely to become a taxpayer then there probably isn't much advantage from using ISAs.

lisyloo

If one is a non tax payer, is there ANY benefit in using ISAs?

There is no immediate benefit.
But there would be a benefit of accumulating the ISA if circumstances change - inheritance, marriage, lottery win.
So unless you have no relatives of any worth, don't play the lottery and are a monk/nun, then I'd say there is a chance however small that your circumstances could change to a point where a ISA would be useful. If you get a lump sum youn can't of course put it all into an ISA because of the annual limits and that's where it would come in useful.

evenasus

I am retired and receive only the state pension.

However, I have to pay tax, as the interest on my non ISA savings takes me over the limit of the £10,500 tax allowance.

DragonQ

datostar wrote: »

My wife is a non-taxpayer and uses a savings account with R85 for tax-free interest.

Slightly off-topic but I don't understand why the R85 still exists. I've been with three banks in recent years that didn't require it - you just tell them when opening the account that you don't pay tax and that's it.

It avoids problems such as banks losing the R85 form and then giving you net interest a year later by mistake (I'm looking at you, Lloyds TSB). >_>

lisyloo

you just tell them when opening the account that you don't pay tax and that's it

Do you mean an on-line R85 declaration?
I did two of those recently on Virgin/Northern Rock.

Strictly speaking they should really still require you to "sign" a declaration whether on-line or on paper. If they just take your word for it (verbally) then they can't cover themsleves.
So did you mean on-line delcarion or verbally?

I guess at the end of the day it's up to the banks, but they are ultimately answerable to the Inland Revenue.

DragonQ

All three were online (Post Office, Bank of Ireland, AA). At least one had a tickbox during the application process and at least one had an gross/net toggle option in the online banking system.