Tell us you cash ISA questions

glaister

Quick question on Flexible ISAs.

Say I have a flexible cash ISA that had £3,000 at the start of the tax year. I have withdrawn money from it over the year, and want to make deposits as much as possible to make the most of my flexible allowance.

What is the highest balance I can reach using my flexible allowance: £3,000 or £3,000 plus interest?

Thanks!

eskbanker

glaister wrote: »

Say I have a flexible cash ISA that had £3,000 at the start of the tax year. I have withdrawn money from it over the year, and want to make deposits as much as possible to make the most of my flexible allowance.

What is the highest balance I can reach using my flexible allowance: £3,000 or £3,000 plus interest?

The flexibility rule is essentially that you can pay back in up to a maximum of what you took out, so the ultimate ISA balance achieved by the end of the tax year doesn't really matter as long as you comply with that....

ET18

I have a help to buy Isa that i opened in September last year with nationwide. Currently it has £2200 in it.

Am I able to open a Cash isa with another provider or can I only open one with nationwide (and their low interest rate)

eskbanker

ET18 wrote: »

I have a help to buy Isa that i opened in September last year with nationwide. Currently it has £2200 in it.

Am I able to open a Cash isa with another provider or can I only open one with nationwide (and their low interest rate)

You can only pay new money into one ISA of each type in any given tax year, so as HTB is a subset of cash ISA, you can't pay into another cash ISA in the same tax year as you contribute to your HTB. However, Nationwide is one of a small number of providers who allow payments into multiple cash ISAs within the same institution, by effectively bundling them together and treating them as if they were one, so you can pay into a Nationwide cash ISA but not into anyone else's.

If your concern is about low interest on non-HTB Nationwide cash ISAs then you might find it better to pay into non-ISA accounts such as current accounts or regular savers - even though these are notionally taxable you only actually pay tax on them if the annual interest exceeds your personal allowance of £1K (for basic rate taxpayers).

Or have you considered using a LISA instead of a HTB, given its higher annual contribution limit? If you're not buying for at least another year, you can get your £2200 moved over from HTB to LISA by the end of the tax year next month and top it up to £4K, before having another £4K allowance for the 2019/20 tax year, all bringing in the extra 25% government bonus.

ET18

Thanks for your quick reply. If I opened a cash ISA with nationwide and transferred it elsewhere in the new tax year, am i correct in that i can only contribute to one of my accounts then - the new cash isa / the htb account.

I am not sure whether I would use the LISA to purchase a house and with the withdrawal penalty that is putting me off.

This tax yesr I am a basic rate payer but I suspect next year I will be a higher rate payer, which is why i want to use ISAs though I do have other regular savers etc.

eskbanker

ET18 wrote: »

Thanks for your quick reply. If I opened a cash ISA with nationwide and transferred it elsewhere in the new tax year, am i correct in that i can only contribute to one of my accounts then - the new cash isa / the htb account.

Yes, although you could also pay into other ISA types.

ET18 wrote: »

I am not sure whether I would use the LISA to purchase a house and with the withdrawal penalty that is putting me off.

I was assuming that your use of a HTB ISA signified that you were saving for a first-time property purchase (which wouldn't entail a withdrawal penalty from a LISA)?

ET18 wrote: »

I suspect next year I will be a higher rate payer, which is why i want to use ISAs though I do have other regular savers etc.

Another benefit of using a LISA is that it's a different type of ISA from cash/HTB, so you can pay £4K into a LISA each tax year while also leaving £16K of your annual allowance available for funding cash ISAs if that's the route you want to go down....

atomicbomberman

I have a flexible cash ISA with Tesco that I opened at the start of the year, transferring previous years Cash ISA into this with a balance of £5000. I've withdrawn and replenished from this account, my current balance is £3000 and it says I can deposit up to £22,000 into the account.

I want to transfer the whole Cash ISA to a flexible Cash ISA available with Coventry Building Society.
If I transfer as it is currently, will Coventry know that I have £22000 that I can deposit into the account, even though I've been withdrawing and replenishing whilst the ISA was with Tesco? Also, if I transferred (closing the Tesco account) and started withdrawing and replenishing with Coventry would HMRC say that I am subscribing to two Cash ISA's and penalise me?

Many thanks!

masonic

atomicbomberman wrote: »

I have a flexible cash ISA with Tesco that I opened at the start of the year, transferring previous years Cash ISA into this with a balance of £5000. I've withdrawn and replenished from this account, my current balance is £3000 and it says I can deposit up to £22,000 into the account.

I want to transfer the whole Cash ISA to a flexible Cash ISA available with Coventry Building Society.
If I transfer as it is currently, will Coventry know that I have £22000 that I can deposit into the account, even though I've been withdrawing and replenishing whilst the ISA was with Tesco? Also, if I transferred (closing the Tesco account) and started withdrawing and replenishing with Coventry would HMRC say that I am subscribing to two Cash ISA's and penalise me?

You need to replace any flexibly withdrawn previous year subscriptions before initiating a transfer (so that your available allowance is £20,000 or less). Anything contributed in the current tax year and flexibly withdrawn does not need to be replaced.

If the Coventry BS ISA is also flexible, then you can continue to make flexible withdrawals/replacement subscriptions after the transfer.

HMRC will only get upset if money from the 2018/19 tax year gets spread between more than one ISA of the same type.

atomicbomberman

Thank you Masonic for your quick reply.

If my Tesco balance was £10,000 (ie using £5000 of the 18/19 tax year ISA allowance) and I transferred to Coventry, would Coventry allow me to place £15,000 into my ISA or would the rule of "not being able to subscribe into two Cash ISAs" apply and HMRC not be happy?

masonic

atomicbomberman wrote: »

Thank you Masonic for your quick reply.

If my Tesco balance was £10,000 (ie using £5000 of the 18/19 tax year ISA allowance) and I transferred to Coventry, would Coventry allow me to place £15,000 into my ISA or would the rule of "not being able to subscribe into two Cash ISAs" apply and HMRC not be happy?

Yes this is fine. Tesco will report £0 subscribed if they have transferred the subscriptions elsewhere before the end of the tax year.