ISA Yearly Interest

harrpau7

Quick question, is interest on an ISA calculated on your total balance or simply the amount that you put in for each tax year?

Eg: Lets say I opened an ISA in April 2010, and for the tax year ending April 2011 I put £5,000 in, and then for the tax year ending April 2012 I also put £5,000 in, would the yearly interest be for the whole £10,000 or simply for the £5,000 put in for the tax year?

Thanks.

lisyloo

It's the total balance for the number of days it's in there.

DreamerV

harrpau7 wrote: »

Quick question, is interest on an ISA calculated on your total balance or simply the amount that you put in for each tax year?

Eg: Lets say I opened an ISA in April 2010, and for the tax year ending April 2011 I put £5,000 in, and then for the tax year ending April 2012 I also put £5,000 in, would the yearly interest be for the whole £10,000 or simply for the £5,000 put in for the tax year?

Thanks.

Just to elaborate slightly, you would get interest on 5000 for year 10/11, and interest on both lots of 5000 in year two (with interest also being calculated on the interest you gained from year 1).

E.g.

At 4% interest:

10/11
start of year 5000
end of year 5200

11/12
start of year 10200 (5000+5200)
end of year 10608

innovate

It all depends when you put the money in.

If you paid £5K in on April 6 2011, and kept the money untouched, you will have got a full year's interest on April 5 2012.

If you then paid in another £5K on April 6 2012 (making your balance £10K), and keep the money untouched, you will get a full year's interest on £10K on 5/4/2013.

DreamerV's numbers are correct if you get 4% interest in both years, for full balances deposited on the first day of each tax year.

If you deposit in smaller amounts throughout the year, your interest will be pro-rata-ed for the number of days you had money in the account.

Worth checking, though, whether the interest rate is guaranteed for more than 12 months from the start - many have a bonus for 12 months. Or if the rate lasts longer, you might not be allowed to top up after your initial deposit.