ISA & Personal Allowance after April

Bango

Hi
Once the new personal allowance comes into play in April, the interest on my savings will be over the £1000 tax free limit by nearly £500.
So i was considering opening an ISA to bring this down to between £50 and £200 (depends on how i move my other savings about)
I'm just not 100% sure about the tax on an ISA after April this year and have a few questions.

• Will they still be tax free after April and if so, am i correct in thinking that the interest will NOT count towards to personal allowance?
• If i opened an ISA today and filled it up with the £15240, could i then add another £15240 to the same ISA in mid-April making the total £30480?
• Also if i opened an ISA today with say Virgin Money and did the above, could i also open another ISA with another provider in April or are you only allowed one ISA per person? I was thinking that maybe I'd be able to add to it during the year rather than putting it into a regular saver account.

I'm fairly new to having accounts with more than one bank, but since reading these forums I'm trying to become more clued up so any help you could offer would be great.
Thanks.

Forgot to add that it was a cash ISA i was thinking about rather than stocks and shares.

talexuser

Yes and Yes, third question basically yes, but you cannot go over the 15240 limit in any tax year.

The plan will work as far as saving on the interest tax is concerned, the problem is finding a cash ISA with a decent interest rate. You should calculate the rates carefully in the accounts you intend to open because it is quite possible you are better off paying tax on the excess interest above 1000 to have more overall. It depends what the banks etc do with their rates come April.
The advantage of the ISA is the savings are tax free of interest and capital gains as long as you keep them, and the 15240 is lost every year you don't use it. So in years to come it could be advantageous to have a large lump sum to invest long term, particularly in funds long term which have a better chance of keeping up with and beating inflation than cash.

Bango

Thanks for your reply.
So i could open 2 ISAs in one year but can only fund them with £15240 meaning i could only put £7620 into each during the year? That does make sense thinking about it as everyone would open ISAs to get the tax free limits rather than having a savings account which is taxed.
I've roughly worked out the interest on my accounts and opening an ISA could reduce the amount i would earned in taxed interest from nearly £500 to just under £100 meaning i'd only have £13 tax to pay.
Right off to google ISAs!
Thanks again.

Cornucopia

You can only open 1 ISA each year, funding it with up to £15240 personal ISA allowance.

YorkshireBoy

Presumably you've already got £50.5K* making 3-5% AER in high interest current accounts?

The worst of these, at 3%, will pay 2.4%/1.8% (depending on your tax rate) after tax. Doubt you'll find an instant access ISA paying better than this.

When do you intend to spend the cash? Because if it's longer than 5-7 years cash probably isn't the best option.

£50K of my cash is making 4.1% (not including my 4/5/6% regular savers). I'd rather pay some tax on this than have an ISA paying 1.31% AER.


* If there are 2 of you, this increases to £130.5K

masonic

Cornucopia wrote: »

You can only open 1 ISA each year, funding it with up to £15240 personal ISA allowance.

There is actually no limit to the number of ISAs you can open each tax year. You can usually only fund one ISA of each type per tax year, but in some cases can fund more than one cash ISA from the same provider in the same tax year.

Most people are better off not holding or funding a cash ISA, as others have already suggested.

Cornucopia

Is this a fairly narrow set of circumstances (when more than one can be opened) because the references I have seen state one cash ISA per person, per year?

YorkshireBoy

Cornucopia wrote: »

Is this a fairly narrow set of circumstances (when more than one can be opened) because the references I have seen state one cash ISA per person, per year?

Just 6 providers offer a 'split ISA' at the moment:

http://www.moneysavingexpert.com/savings/best-cash-isa#split (click "Can I split...")

masonic

Cornucopia wrote: »

Is this a fairly narrow set of circumstances (when more than one can be opened) because the references I have seen state one cash ISA per person, per year?

Do you really mean "when more than one can be opened"?

Assuming you really do mean that, the circumstances where more than one can be opened are, for example, when someone has subscriptions from a previous tax year that they wish to transfer. They can open a cash ISA and transfer some or all of those funds into it. They can do that an unlimited number of times.

They can also open a new cash ISA to subscribe new money (or transfer their current year subscriptions - these must be transferred in full). They can transfer their current year subscriptions (in full) an unlimited number of times and can do so even if they have also transferred their previous years subscriptions held in the same or different cash ISA one or more times during the same year.

When ISAs were worth holding, I once opened 3 new cash ISAs in the same tax year - one for new money, which didn't accept transfers. One to transfer an older cash ISA into. And, later in the same tax year, one to move the latter money again into a fixed rate ISA when interest rates started plummeting.

Bango

YorkshireBoy wrote: »

Presumably you've already got £50.5K* making 3-5% AER in high interest current accounts?

The worst of these, at 3%, will pay 2.4%/1.8% (depending on your tax rate) after tax. Doubt you'll find an instant access ISA paying better than this.

When do you intend to spend the cash? Because if it's longer than 5-7 years cash probably isn't the best option.

£50K of my cash is making 4.1% (not including my 4/5/6% regular savers). I'd rather pay some tax on this than have an ISA paying 1.31% AER.


* If there are 2 of you, this increases to £130.5K

There is only me and i earn 24k a year so i'll be in the lower tax limit.
I've got £31000 sat in a fixed rate bond earning 2.28%, £2000 in a tsb current account at 5% plus the linked regular saver (both only recently opened) £40,000 in an account earning 1.41% and around 30k sat in various account with of 0.25% to 0.80% - these are gross interest rates.
The ISA i was thinking of was the Virgin cash isa at 1.41% and funding it out of the £40k i've already got sat at 1.41% leaving just under 10k in that account. Although this does seem daft thinking about it, i should move the 30k earning the rubbish interest first.
Where should i be looking for better rates if i don't want a stocks and shares ISA and don't have the direct debits required to open the better rated current accounts?
Sorry if this seems a stupid post, until recently i had the majority of that money sat in a savings account earning a rubbish interest amount of 0.50%. I didn't even consider moving it until the bank dropped the rate to 0.25% now i'm wanting to get the best back i can.
Thanks for all the help so far, i am really grateful that you have all taken the time to read and reply.

jimjames

YorkshireBoy wrote: »

Just 6 providers offer a 'split ISA' at the moment:

http://www.moneysavingexpert.com/savings/best-cash-isa#split (click "Can I split...")

Effectively the rule still stands because these providers consider that different ISA products are still ONE ISA for the purpose of regulations.