Basic ISA help

musashi10

Hi, I understand most of the principles with how isas work after reading the intro here.

What I want to know is you have 1 per tax year. So If I open one today at say 2% and deposit £100/month, do I get that 2% interest free calculated every day until the end of this tax year?

Or do I post funds and the total collected at the end of this tax year is then attributed interest for the year 2014-5?

evenasus

You would receive £12.96 at the end of 12 months.

Use this calculator... http://www.moneysavingexpert.com/savings/best-regular-savings-accounts#savingscalc

musashi10

Thanks.

So interest accrues as soon as you put the money in?

Therefore, would I be better off putting that 100a month in a savings account for almost a year, then just before the tax year end putting the lump sum in an isa so I get 1 year interest free on a larger sum of money?

Or am I getting this wrong?

Cheers

evenasus

The difference it would make would depend on the interest rate.

If you put £100 a month into a savings account, you would need to find one that paid 2.5% to accrue the same amount of interest as a 2% ISA. That is if you're a tax payer.

Also, if you put it in an ISA, then you could build up many years worth of tax free savings in the future.

I have used the full allowance in ISAs since they first started - and TESSAs before that. So since 1991.

ColdIron

An ISA is not linked to a tax year, the amount of money you can put into one is

Once the money is in an ISA they work just like a savings account except you pay no income tax on the interest

Like any other deposit account the interest can be paid monthly, annually, on maturity etc

However the interest will be calculated daily at whatever rate prevails on that day, including any future years you keep the account open, irrespective of what tax year it may be

evenasus

musashi10 wrote: »

Therefore, would I be better off putting that 100a month in a savings account for almost a year, then just before the tax year end putting the lump sum in an isa so I get 1 year interest free on a larger sum of money?

Are you thinking, that if you put £1200 in an ISA just before the financial year end, you would receive 2% (£24) for having the £1200 for a few days?

It may sound silly but some people think that is how it works.

Crabman

This thread has been moved to the ISAs sub-board.