ISAs - Interest on interest?

alfred1_2

I have a halifax isa and I have received my interest on 3000.00. i am being told i can put in another full 3000.00, however that will obviously send me over 6000.00 in my isa account because of the interest gained, so what i need to know is, will halifax only pay out interest on the 2 sets of 3000.00 at the beginning of the next tax year - if so, the original interest that is lying in the account made in the first year is not earning anything, is that right?

please help.

Alfred.

dunstonh

ISAs are a contribution allowance, not one restricted by balance.

You can pay £3000 per year in and it doesnt matter what it grows to.

jem16

alfred1 wrote: »

I have a halifax isa and I have received my interest on 3000.00. i am being told i can put in another full 3000.00, however that will obviously send me over 6000.00 in my isa account because of the interest gained, so what i need to know is, will halifax only pay out interest on the 2 sets of 3000.00 at the beginning of the next tax year - if so, the original interest that is lying in the account made in the first year is not earning anything, is that right?

please help.

Alfred.

If you had £3k in for the whole of the tax year and the interest rate is 5.3% you would then have £3159. Add another £3 and you have £6159. At the endo f the tax year you will receive interest on the whole £6159. So basically you are earning interest on your interest.

Kool_Kool

ISAs are no different to any other saving account when it comes to accretion of interest. Once interest is earned it is rightfully your money and if you leave it into the account it will accrue interest. This is how savings grow and grow. I started my Isa about 5 years ago and the interest, plus interest on it and on and on, have added up to a very nice sum.

alfred1_2

thanks for the advice guys.

i really appreciate it.

Alfred x

LittleJo

Hi,
It is customary on here to show your appreciation by pressing the 'Thanks'
Jo

GreyPilgrim

Hi guys. the ISA I started in 2006 - 2007 was my first ever one, so this is probably a dumb question...but is there a norm for when the interest on it should be paid? Mine is with Bradford and Bingley.

I was expected to see the interest go on the £3000 at the end of April or thereabouts, but B&B tell me it won't go in till July. Is this standard? Feels like I'm missing out on three months potential 'interest on interest'

dunstonh

I was expected to see the interest go on the £3000 at the end of April or thereabouts, but B&B tell me it won't go in till July. Is this standard? Feels like I'm missing out on three months potential 'interest on interest'

You are not losing anything. July to July is still the same 12 months as April to April.

GreyPilgrim

dunstonh wrote: »

You are not losing anything. July to July is still the same 12 months as April to April.

Of course it does.

(*slaps head repeatedly*) :rotfl:

dunstonh

BTW, I like your avatar GP.

ashm1

dunstonh wrote: »

ISAs are a contribution allowance, not one restricted by balance.

You can pay £3000 per year in and it doesnt matter what it grows to.

If your ISA provider 'failed' would you get back your money and the allowance from the FSA ?

Thanks,

Ashley.