ISA Questions

smithysaver

If I withdraw funds from my ISA, I've read it loses its tax free status does that mean that the amount you draw out gets taxed when paying out your interest and the remaining money you didnt draw gets the tax relief.

Also I'm thinking of moving my current ISA with halifax 5.3% to YBS 5.65% anyone think this is a good move or will the loss of interest while transfering make it not worth while?

jem16

smithysaver wrote: »

If I withdraw funds from my ISA, I've read it loses its tax free status does that mean that the amount you draw out gets taxed when paying out your interest and the remaining money you didnt draw gets the tax relief.

You won't get taxed when you withdraw the money. It just means that your money will no longer be in a tax-free environment so if you then save it elsewhere you will be liable to tax on the interest gained. If you simply spend it, there is no tax liability.

Also I'm thinking of moving my current ISA with halifax 5.3% to YBS 5.65% anyone think this is a good move or will the loss of interest while transfering make it not worth while?

Might be best to wait until the end of the month and see if the Halifax or YBS put up its rates.

YorkshireBoy

smithysaver wrote: »

Also I'm thinking of moving my current ISA with halifax 5.3% to YBS 5.65% anyone think this is a good move or will the loss of interest while transfering make it not worth while?

I made the same move earlier this year. I calculated that, with a 0.35% differential, each day lost during the transfer takes 15 days at the higher rate to break even.

My transfer took only 2 days, and because YBS backdate the credit to the day they receive the cheque from Halifax it took a month for me to break even.

The worst that can happen is that if Halifax post the cheque on a Friday you will lose 4 days - which means you'll be a couple of months before you 'benefit' from the higher rate.

If I was you, and as jem16 says, I'd wait and see what happens in the market following last weeks base rate increase before initiating a transfer.

smithysaver

So if I opened up a new ISA that dont acept transfers in, then just close my current ISA and put the cash in without transfering would that be easier? and you wouldnt lose interest as you open the ISA first then close existing one when new one is open. And put the money in straight away?

Also if I use up all my allowance this year and then tranfer fron halifax to YBS would the interest still go on the balance at YBS taking me over the £3000 a year limit? Would this create a problem?

KTF

If you close your existing one then open a new one you could only put a max of 3k back in.

If you transfer your existing one then the 3k + interest from your previous ISA gets moved over and you can put another 3k on top to make it 6k in total. This is the advantage of transferring it.

The 3k limit a year is money that you put in. Interest is then added to this and is included in the total.