Interest & yearly subscriptions?

JustAnotherSaver

I'm pretty sure as in 99% that interest earned doesn't count towards your yearly subs.
But with 1st March being the cut off for Skipton and HTB transferring then for the sake of just asking here then i'll just go ahead and ask to be 100% sure.



On the topic of which - i love their pre-done .pdf you're to sign and how they auto-check the box to say that you've not subscribed to a HTB ISA in this tax year. What a poor assumption on their part.

I assume you just write next to it that this is incorrect and fill in the amount you subscribed as there appears to be no option to edit the .pdf.

ValiantSon

Do you mean, "Does the interest earned in an ISA count towards your annual ISA allowance?"

If that is your question then the answer is no.

eskbanker

The rules around LISA contributions and HTB transfers are more complex though, so the £4K annual LISA allowance applies regardless of the composition of the funds transferred in (except for pre-17/18 HTB money), so interest earned during 17/18 on a HTB ISA does count towards the 17/18 £4K LISA allowance on transferring.

ValiantSon

eskbanker wrote: »

The rules around LISA contributions and HTB transfers are more complex though, so the £4K annual LISA allowance applies regardless of the composition of the funds transferred in (except for pre-17/18 HTB money), so interest earned during 17/18 on a HTB ISA does count towards the 17/18 £4K LISA allowance on transferring.

Really? I don't doubt what you say, but I want to check I've understood correctly. Are you saying that the interest earned on a LISA or HTB ISA counts towards the £4000 annual allowance if a transfer is made to a new provider during the tax year, or are you saying that the interest earned in previous tax years also counts?

In scenario 1 I can see that making some (albeit not a lot of) sense, but in scenario 2 that wouldn't make any sense because the result would be that your allowance would actually reduce each tax year. Is that really the case?

I understood the OP to mean that they would be transferring an HTB from this tax year to a LISA for the new tax year.

JustAnotherSaver

Wow i never knew this question would get so complicated.

Basically Q5 on Skipton's form to transfer a (WHOLE!) HTB ISA to their cash LISA states:

Have you subscribed to this ISA in this current tax year?

It goes on to say:

If Yes, please enter the amount paid in this tax year:

They have auto checked the no box for some reason. They didn't even ask!


Well my brother opened a HTB ISA with Halifax when they got rolled out. I think there were 4 months he didn't pay the maximum in but other than that he's paid the maximum in every time.

So his total balance right now reads around £5.6k

This tax year (so 2017-18) he's paid in £1,800.

In December just gone i think it was, he got an interest payment of £139.76. Whether it was November or December it was still this tax year.

So has he subscribed £1,800 this tax year is what i was asking in post #1 or has he subscribed £1,939.76?

I just wonder why Skipton would assume you haven't subbed in this tax year at all.Will have to scrub out their tick and write a note next to it or something i suppose, but just depends what total is considered to be the subbed amount.

eskbanker

In answer to both of the above posts, the LISA rule is quite simply that it is only possible to put £4K into a LISA in any given tax year either from new money or by transferring money from another type of ISA (transfers between LISAs aren't subject to this cap), and therefore there is no relevance in distinguishing whether it includes pre-LISA interest or not.

The exception to the rule relates only to money in an HTB ISA as at 5 April 2017 (and interest accrued but not paid up to that point), which during this tax year only can be transferred into a LISA without counting towards the £4K limit.

I suspect that Skipton don't allow the entry of figures for a whole HTB to LISA transfer because they'll be obtaining these from the HTB ISA manager, together with the all-important split between 17/18 money and previous years'.

A much fuller explanation is available in clauses 9B.15-22 of the official ISA scheme rules, including a helpful table....

JustAnotherSaver

Considering he's probably 6 years or so from being in a position it may also be worth leaving in a HTB ISA earning the higher interest

Paying that £200 in to a regular saver each month, getting the interest & then withdrawing the required amount to push it to £4k and paying that in to the cash LISA & then repeating this process for the next few years until the HTB ISA is dry.