Need some advice about ISA's?

johnsmi

Hi,

I would be grateful for some advice on an isa of my partners that is due to mature shortly.

All our savings are in my partners name as it makes sense as she doesn't work and is able to claim gross internest.

All our savings (in her name only) are with the one bank and are over £85k, so it makes sense when the isa matures to move it to a different institution to get the extra protection from the FSA.

A few questions I would be grateful for your advice on,

1 if another isa is opened in a different bank do we need to do all the leg work going into our existing bank to get it changed, as I have read somewhere in Daily Mail money that the new bank will arrange to get it transfered?

2 The isa maturiy balance will be approx 9K (she has had it for a while with the same bank, but hasn't topped up every year) would it make sense now, since she is a non taxpayer just to cash in the isa and put it into a normal account, and would she be penalised tax wise for doing so?

3 a general questions about isa's I understand the principle about encouraging you to save, but whats the point in getting tax fee, if you are going to be hit with all the tax saved when you cash them in or need the money?

I thank you very much if you take the time to pass some advice in my direction.

Thanks
John

Macca83_2

If your wife doesn't pay tax then it makes sense to put the savings into any account that'll offer the highest interest. If you want to keep it in an isa then make sure you use the banks isa transfer process to move the funds. You'll also need to check that the New isa account allows transfers in. The isa provider Will be able to advise you if this is possible.

Im not sure what you mean when you say that you'll be hit with the tax if you were to cash the isa in? You don't have to pay back any tax saved if you were to cash the isa.

innovate

johnsmi wrote: »

All our savings (in her name only) are with the one bank and are over £85k, so it makes sense when the isa matures to move it to a different institution to get the extra protection from the FSA.

Definitely reduce your holdings with a single institution to below £85 (allowing for any interest addition) asap

johnsmi wrote: »

1 if another isa is opened in a different bank do we need to do all the leg work going into our existing bank to get it changed, as I have read somewhere in Daily Mail money that the new bank will arrange to get it transfered?

If you do not use the formal ISA transfer process, your money will lose its tax-free status

johnsmi wrote: »

2 The isa maturiy balance will be approx 9K (she has had it for a while with the same bank, but hasn't topped up every year) would it make sense now, since she is a non taxpayer just to cash in the isa and put it into a normal account, and would she be penalised tax wise for doing so?

There is little mileage in giving up the tax-free status if there is any remote chance that she will become a tax payer again at some stage. Also, ISAs currently pay better interest than any other savings account.

Banks automatically withhold basic rate tax from standard savings accounts unless you have asked them to pay gross (usually requires an R85)

johnsmi wrote: »

3 a general questions about isa's I understand the principle about encouraging you to save, but whats the point in getting tax fee, if you are going to be hit with all the tax saved when you cash them in or need the money?

You only have to pay tax on the interest after you have withdrawn the money from the ISA and once it starts earning interest in a non-ISA account and if you are a tax payer. If you just want to spend your ISA money, there is no tax on it (other than VAT etc on the purchase).

johnsmi

Ah thanks very much for the replies and the very good information.

Its great to know that if she wanted she could cash the isa in and wouldn't be penalised for any tax, as for some reason I have for a long time had the wrong end of the stick, if you cashed an isa in then you would have to pay back a certain amount of tax that was given tax free in earlier years.

How wrong I was and thanks again for setting me straight on this.



John

Norman_Castle

All our savings are in my partners name as it makes sense as she doesn't work and is able to claim gross internest.

Any isa's in your name would receive gross interest. They're tax free.