ISA Questions - Confussed!

MickyJ

OK. So I thought I understood the ISA rules, but now I'm more than a little confused!


If you already have a cash ISA open from last year, are you able to put the full £5,760 into the same ISA on 6th April and then put an additional £9,240 on July 1st? If not, then would I be correct in assuming that you will be able to do this with a new ISA that you open after April 6th?

Under the previous ISA rules, would I be correct in assuming that you could continue to save into the same cash ISA for more than a year providing that you haven't exceeded the annual limit for each year? For example, you open an ISA in the 2012 - 2013 tax year and put £5,640 into it; then, in the 2013 - 2014 tax year, you could put a further £5,760 into the same ISA?

Both of my questions are concerning variable instant-access cash ISAs only, and I'm only concerned with HMRC rules (I'm aware that provider's restrictions may vary).

Archi_Bald

You could choose either approach.

However, you would most likely open a new ISA since the interest rate on your existing ISA has probably plummeted. You would probably want to find an ISA that has better interest rates and allows transfer-in. This may or may not be the same you want to deposit your new allowance into.

Your allowance goes up to £5,980 on April 6, and then to £15,000 on July 1.

There are current accounts that pay better interest rates than instant access ISAs.

Lansdowne

Yes, what you have described is precisely how ISAs are supposed to work. As long as the provider continues to allow deposits into the account, you can pay in up to the year's limit into an ISA startedin an earlier year. In practice this will usually be possible for "variable instant-access cash ISAs only" as you correctly imply. And this will usually be the low-interest paying ones.

MickyJ

Archi_Bald wrote: »

Your allowance goes up to £5,980 on April 6, and then to £15,000 on July 1

Thanks for reminding me of the new limit - I almost forgot all about that!

Turns out I just confussed myself - that's pretty much how I understand it. Just one other question, though: let's say you chose to put £5,980 into an existing ISA; what (if anything) would stop the provider from 'closing' the ISA to further deposits before July 1st? As I understand it, you can only contribute to one ISA per year - is that correct? So you couldn't open a new ISA to deposit the remainder of your £15,000 into? Or does the rule state that you can only OPEN on ISA account per year? In that case, you could transfer the £5,980 into the new ISA along with the rest?

Sorry for the complicated question, but I'm trying to help someone else understand it - and, unfortunately for me, I don't have any personal experience of saving such large sums of cash.

xylophone

http://www.hmrc.gov.uk/isa/new-isa-faq.pdf might help.

ISA Questions - Confussed!

Concussed and confused?:D

kidmugsy

xylophone wrote: »

http://www.hmrc.gov.uk/isa/new-isa-faq.pdf might help.



Concussed and confused?:D

It's a coalition govt so it should be confussed and libdemfussed.

ColdIron

kidmugsy wrote: »

It's a coalition govt so it should be confussed and libdemfussed.

Am I fussed? Well Ed Balls couldn't give a t0ss

Herbalus

From the HMRC FAQ:

You can only pay into one Cash ISA ... in each tax year. So, if you have paid into a Cash ISA since 6 April 2014 and the terms and conditions of this account do not allow further amounts to be added, you cannot open another Cash ISA before 6 April 2015.
However, you may make additional payments ... by transferring your Cash ISA to another provider that will allow additional amounts to be added.

I understand this to mean you can't open another Cash ISA in the year unless you close your current one and transfer the balance to the new one.

Archi_Bald

Herbalus wrote: »

From the HMRC FAQ:



I understand this to mean you can't open another Cash ISA in the year unless you close your current one and transfer the balance to the new one.

You don't close your ISA. Use a formal ISA transfer.

Herbalus

Archi_Bald wrote: »

You don't close your ISA. Use a formal ISA transfer.

Yes, lack of accuracy in my post. I meant "close your ISA" in that you open a new one, request a transfer, and the old ISA will be closed on the basis of the entire balance being transferred out.

Is that better?