Top Cash ISAs Discussion Area

Jake'sGran

jem16 wrote: »

Whilst it's true that you can't put the money back in, you are still getting the benefit of tax-free saving so it's better in an ISA than in a taxable savings account.

Maybe you have misunderstood what I mean? While the money is in the ISA it is tax free. That's the whole point of having an ISA. But, if you deposit say £3600 and then decide you need some of that and withdraw it, the amount you have withdrawn cannot be deposited again in that ISA. They don't work like that. This is an extract from Martin's guidance on the subject:

" How can money be withdrawn?
A. A common mistake is to think an ISA needs to be held for a set length of time in order to reap the tax-free benefits. Luckily, that's wrong! Providing the rules of the individual product allow it (there's loads that do!), you can have full, instant access to your money without losing the tax benefits on the rest of your savings in the wrapper.
However, once the money's withdrawn, it can't be returned. A few examples should help clarify this:

jem16

Jake'sGran wrote: »

But, if you deposit say £3600 and then decide you need some of that and withdraw it, the amount you have withdrawn cannot be deposited again in that ISA.

No I understood what you were saying and what you are saying is correct.

However what I meant is that an ISA is a tax-free savings account. At some point you will want to spend it otherwise what are you saving it for? It's not because you will never take it out and just watch it grow.

So save it in an ISA and use the money when you want - at least it will have been tax-free whilst you were saving. It would be foolish to say don't use an ISA if you want to make a withdrawal.

That's exactly what Martin was saying in the extract you quoted.

clairbear_3

Hi all,
I have a shares ISA with 3600 invested can I open a cash ISA with another provider to use 3600

whisky1971_2

I have just opened a cash isa for the first time and i wondering:

If i pay in the full £3600 allowed into the isa, when the full year has elapsed, can i remove the years interest made on the amount taking it back down to £3600 again to leave the max amount allowed in this isa to make interest again in year 2,3,4,5 etc?

jem16

You don't need to take any interest out. It can be left in the ISA to grow. The interest does not count as part of the allowance.

Jake'sGran

whisky1971 wrote: »

I have just opened a cash isa for the first time and i wondering:

If i pay in the full £3600 allowed into the isa, when the full year has elapsed, can i remove the years interest made on the amount taking it back down to £3600 again to leave the max amount allowed in this isa to make interest again in year 2,3,4,5 etc?

Yes, I believe you can have the interest only (after one year) if you wish to continue with the capital in the ISA or, at least, you used to be able to. This is the link for the full ISA rules which changed this year,
www.hmrc.gov.uk/ISA/rule-change-april08.htm

jem16

Jake'sGran wrote: »

Yes, I believe you can have the interest only (after one year) if you wish to continue with the capital in the ISA or, at least, you used to be able to. This is the link for the full ISA rules which changed this year,
www.hmrc.gov.uk/ISA/rule-change-april08.htm

I may be wrong but I think whisky1971 is under the misapprehension that you can only ever have the maximum of £3600 in an ISA and has to withdraw the interest so as not to go over the allowance.

Jake'sGran

jem16 wrote: »

No I understood what you were saying and what you are saying is correct.

However what I meant is that an ISA is a tax-free savings account. At some point you will want to spend it otherwise what are you saving it for? It's not because you will never take it out and just watch it grow.quote]

Oddly enough, I have bought ISAs since they started and have not spent any of it. Before that I bought PEPs and TESSAs. I bought ISAs because I was worried about Inheritance Tax and when making a tax return I did not have to mention this money. I am in poor health and not able to spend it on fantastic holidays. My children and grandchildren will do well but hey, that's life.

jem16

Jake'sGran wrote: »

Oddly enough, I have bought ISAs since they started and have not spent any of it. Before that I bought PEPs and TESSAs.

At the moment I have not spent any of mine either - I have around £30k in cash ISAs.

I bought ISAs because I was worried about Inheritance Tax

Unfortunately ISAs still count towards Inheritance Tax.

and when making a tax return I did not have to mention this money.

That's true.

I am in poor health and not able to spend it on fantastic holidays. My children and grandchildren will do well but hey, that's life.

At least you have the money should you need it.

Jake'sGran

Yes Jem, I realise what you mean about the inheritance tax. I did worry a lot about this subject but the amount was increased in the last budget. In the meantime I don't have to think about the interest adding to my income.