Stupid question re ISAs ...

doinwell

1) When and on what amount is interest paid?

For example, a) if I open an ISA with the full annual allowance of £5k+ in April 2011, but took out £2k during the year, will I receive interest on what is left or on what I had in total in the account over the year?

and vice versa...

b) if I opened an ISA with say £1k this year but able to put in the full allowance amount by say Feb/Mar the next year, would I receive interest on what is left or on what I had in total in the account over the year?

Is interest worked out on a daily basis, monthly basis and then final figure added to the ISA account @ the end of the ISA year?

The reason for asking is that when thinking about it, if interest is paid annually only (e.g. in April 2012), I could have saved all the money through the year, opened an ISA with the full allowance amount in the last month of the ISA year then get the interest on that amount. I could then continue doing this process forever and ever amen... or am I thinking about it all wrong?

Kind regards, doinwell (but a bit dim re ISAs!)

Moist_von_Lipwig

Interest is calculated on a daily basis on the balance in your account and credited either monthly or annually, depending on the ISA you subscribe to. You will not receive interest on money that is not in your account.

DreamerV

The above post is correct. ISAs are calculated daily on what is actually in the account for that day, and then it's all added on a specific date of the year (either a pre-assigned date for that bank/building society or on the anniversary of when you took out the product (or monthly)). This continues year after year, and when you finally take out or transfer the money, interest is paid for the period from when they last paid interest to the leaving date (having been calculated daily).

So you could put in £1 on day 1, and £5639 on day 365, however you will get interest on the £1 for the 364 days, and a day's worth of interest on £5640.

Or you could put in 5640 on day 1, and take out 5639 on day 365, and would get interest on 5640 for most of the year, and interest on only £1 for the 365th day (and on 366th day if a leap year of course).

Hope that helps

doinwell

Thank you very much for the responses. It has been most helpful to me. I didn't even realise until just recently that an ISA could be opened up specifically to transfer money to it! I had been living in fear that someone would come after me for having 2 ISAs open in the same year! Once again, thank you.