Top Cash ISAs Discussion Area

rb10

Hi kiridoh, and welcome to MSE

kiridoh wrote: »

1) I understand yearly tax free cap for cash ISA is £5,100 per person. Would I need (or is it possible) to open a joint ISA account to avail of the cap x2 between my wife and I?

You cannot open a 'joint' ISA - they can only be held in one name. However, you can put up to £5100 in a cash ISA in your name, and your wife can do the same, in a separate account in her name.

kiridoh wrote: »

2) is interest paid on an yearly basis? if less, is it compound?

Most ISAs pay interest annually, but a few pay it monthly. Unless that particular ISA states that the interest is paid out to a different account, then it'll always be compounded on each interest payment date.

kiridoh wrote: »

3) A quick calc:eek:. Assumptions:
- we invest in a cash ISA where the interest rate is 2.5%
- rate is stable for the entire 5 years period
- we transfer £500 per month in total
- interest is compound at the end of each tax year
- int pm is calculated as bal*0.025/12
How accurate is the below?
[Cut]

The calculations look accurate, from a quick look.

However, I think your assumptions are a little much! It's very difficult what's going to happen later in 2011, let alone 2016.

kiridoh wrote: »

4) website suggests to shop around at the end of year tax year (march?) and transfer the balance to the best provider on the market.

The end of the tax year is 5th April. Look around regularly - the easiest way to do this is to put this link in your favourites, and look at it every month or two. It gives a comprehensive, frequently-updated, list of all the best cash ISAs so that you can check that yours is competitive.

You can transfer your ISA at any time of year. Interest will (nearly always) be paid up to the date of closure, even if it hasn't actually been paid to the account yet.

kiridoh wrote: »

So say my current provider no longer gives me 2.5% each year from Mar-12 onwards, will I be able to transfer the balance 6,580.21 to a new provider and still avail of the tax free interest allowance? In other words, will I get 12,300.80 on Mar-13 or would I have to have opened a new cash ISA on Mar-12?

Say you open an ISA today, with Bank A.

Then, in August 2011, you find that a better ISA has come along, at Bank B. You instruct Bank B to transfer your existing ISA to them, and they do so. Before Bank A close the old one down, they add the interest for Jan-Aug. You'll then have the whole of that ISA sitting with Bank B.

But, your £5100 allowance is per tax year. This means that from 6th April 2011 onwards, you have a further £5100 that you can put into ISAs. This money can go into either Bank A, or Bank B, or elsewhere.

kiridoh wrote: »

5) If I open a new ISA account now, can I put one lump sum for 10,200 and avail of the tax free allowance?

You can put in a lump sum now of £5100, and your wife can do the same. All the interest that you receive will be tax-free.

If you want to have £10200 each (i.e. £20400 in total), then you'd need to go into Stocks and Shares ISAs, which is a completely different kettle of fish.

kiridoh

rb10 wrote: »

Hi kiridoh, and welcome to MSE

Cheers rb10!

rb10 wrote: »

It's very difficult what's going to happen later in 2011, let alone 2016.

Fair enough, but should I be worried? What could potentially happen?

rb10 wrote: »

You can transfer your ISA at any time of year. Interest will (nearly always) be paid up to the date of closure, even if it hasn't actually been paid to the account yet.

So for a certain period I will have to keep open two ISA accounts -one with the old institution where my interest will be paid and one with the new institution where I moved the capital?

rb10 wrote: »

You can put in a lump sum now of £5100, and your wife can do the same. All the interest that you receive will be tax-free.

So technically I could put £5100 on Apr 5th 2011 and £5100 on Apr 7th 2011 and not be taxed a penny until Apr 6th 2012? Or will I not get taxed as long as I don't widthraw the money?

rb10

kiridoh wrote: »

Fair enough, but should I be worried? What could potentially happen?

Worried? No, not really.

What could happen? Well, rates could go up or they could go down. But whatever happens, it's unlikely that they'll stay at a constant 2.5% as in your prediction for a whole five years.

kiridoh wrote: »

So for a certain period I will have to keep open two ISA accounts -one with the old institution where my interest will be paid and one with the new institution where I moved the capital?

You can hold as many ISAs as you wish. The only rule is that you can only pay in up to £5100 per tax year, and this can only go into one ISA.

kiridoh wrote: »

So technically I could put £5100 on Apr 5th 2011 and £5100 on Apr 7th 2011 and not be taxed a penny until Apr 6th 2012? Or will I not get taxed as long as I don't widthraw the money?

You could do this, and if you leave the money inside the ISA, you will never be taxed on it (well, unless the Gov't decide to scrap the ISA schame).

kiridoh

rb10 wrote: »

You could do this, and if you leave the money inside the ISA, you will never be taxed on it (well, unless the Gov't decide to scrap the ISA schame).

Great. Therefore, in my example, say I deposit 5100 on Apr 5th and 5100 on Apr 7th, would the interest on the entire 10200 not be taxed as long as I keep the money on the account?

rb10

kiridoh wrote: »

Great. Therefore, in my example, say I deposit 5100 on Apr 5th and 5100 on Apr 7th, would the interest on the entire 10200 not be taxed as long as I keep the money on the account?

Yes, that is correct.

kiridoh

Thanks!!!!

purplestar133

I've posted this on another thread without a reply so am trying this thread to see if anyone can help. Hope that's ok!

I'm thinking of transferring to the Northern Rock 1 year FRISA when my current FRISA matures, later this month. Just had a quick glance at the summary box and it says on maturity the FRISA will change to a 30 day cash isa at a variable rate. I can't see a 30 day cash ISA on offer on Northern Rock's website at the moment. Does anyone know if this is an account that requires notice to be given? The '30 day' part of it's name does suggest it...

AjStez

i don't quite understand why people tend to want to put money in a an isa for 5-6 years theres so much better things you can do. if you don't want to invest all of your thousand pounds or whatever into a bond why not split it in half. I have 500 pounds in a one year bond with barclays which is secure and at 2.8% they have higher rates for the more u want to put in. I also have several savings with barclays and offer kudos to their monthly savings. I had 1500 with halifax and moved 500 into the bond and 1000 into what they call an essential savings only on 0.1% though, however the monthly savings offers 3.03% pretty damn high so i send 250 (the max you can put in a monthly each month) from my 1000 savings to my current and from their to the monthly savings the year this account runs means ill make 80quid in intrest! Im sure this isn't what barclays want me doing but ha! tough look. My advice look at these monthly accounts nationwide has a xmas one on 3percent works in the same way as m barclays on i think

Ajay x

blueberrypie

AjStez wrote: »

i don't quite understand why people tend to want to put money in a an isa for 5-6 years theres so much better things you can do. if you don't want to invest all of your thousand pounds or whatever into a bond why not split it in half. I have 500 pounds in a one year bond with barclays which is secure and at 2.8% they have higher rates for the more u want to put in.

Barclay's current one-year bond is offering 2% on amounts from £500 to £1 million. That's before income tax is deducted - if you are a basic-rate taxpayer, you'll actually see about 1.6% of it. ISA interest is tax-free - and your funds, as well as any accrued interest, will continue to earn interest without tax being deducted, for as long as you keep it in an ISA.

Barclay's Regular Saver offering 3ish% is beaten by several others offering 4%, and First Direct's Regular Saver offers 8%. I'm not quite sure how you're working out that you'll earn £80 in interest from the monthly saver - £250 a month at 3% works out to about £49 before tax at the end of the year.

purplestar133

I have been paying into and transferring ISAs for a few years now, but I am still doubting myself...so I just want to check: I wish to transfer a previous year's ISA into a Fixed rate ISA which has a minimum opening deposit of £500. Is that amount covered by the amount I will be transferring in (which is more than £500)? I don't have to pay £500 of 'new money' into this account as well as transferring do I?