Cash ISAs

afis1904

Hi,

I am relatively new to this and I recently found out that you are only allowed to open one cash ISA per tax year. However, I couldn't find a clear definition of what would constitute a cash isa. I know a help to buy one does, but what about a Marcus account (which I recently opened) or regular saver accounts?

droopsnoot

That's not strictly true, I believe the rule is that you can only pay new money into one cash ISA per year. You can open more than one, you could transfer money from one into another (as long as the recipient processes it as a transfer, you don't withdraw from the old and pay into the new) but you can only stick new money into one cash, one S&S, and perhaps others than I'm not familiar with.


Accounts are normally pretty well signposted as a "Cash ISA" because of these rules. There's normally a declaration you have to confirm at some point during the account opening process if it's a cash ISA, to really ram it home.

soulsaver

Marcus doesn't do ISAs at the moment. If they did they'd be making it clear.

Have a look at the best buys at the top of the page and visit a few of the sites' home pages/savings and you'll get the picture.

Also maybe research the implications of £1k pa interest/Personal Savings Allowance for basic rate (BR) tax payers.

afis1904

Thanks a lot, I wasn't aware of the difference in terms of tax and some sites that compare savings accounts tend to lump standard savings accounts and ISAs together so I wasn't sure what the difference was.

I won't be saving enough to make more than £1000 in interest so I guess for me the only ISAs worth considering would be LISA and help to buy and I'm aware that some banks offer split ones

aesthetic

Long time listener, first time caller. I also have a question about Cash ISAs that I haven't been able to find an answer to anywhere. I'm also very new to this investing lark and it could be that I'm being a bit of a dunce, so please forgive me.

I opened a fixed term 1 year Cash ISA in August for the maximum possible amount -- 20k. I understand that in the new tax year in April, I am able to pay in another 20k, as per the annual allowance. Will this 20k be put into the same ISA, making the ISA 40k, or will it be 2 separate ISAs? Do I have to wait until the 1 year is up in August before I can pay into the same ISA making it 40k?

Essentially I'm planning on squirreling away 20k per year but I'm trying to determine if each year it ends up being a separate 20k ISA, or it accrues over time 20, 40, 60 etc. etc.

Again, apologies if I'm being a dunce. For some reason this is really bugging me!

Cheers x

eskbanker

aesthetic wrote: »

I opened a fixed term 1 year Cash ISA in August for the maximum possible amount -- 20k. I understand that in the new tax year in April, I am able to pay in another 20k, as per the annual allowance. Will this 20k be put into the same ISA, making the ISA 40k, or will it be 2 separate ISAs? Do I have to wait until the 1 year is up in August before I can pay into the same ISA making it 40k?

In general it's possible to keep adding funds to the same ISA rather than restarting new ones each year, but not if you've signed up to a fixed term one, as these normally won't allow further contributions after an initial short window (typically between a couple of weeks and a couple of months), so assuming this to be the case here then you'll need to open another one next year.

aesthetic

eskbanker wrote: »

In general it's possible to keep adding funds to the same ISA rather than restarting new ones each year, but not if you've signed up to a fixed term one, as these normally won't allow further contributions after an initial short window (typically between a couple of weeks and a couple of months), so assuming this to be the case here then you'll need to open another one next year.

This didn't appear to have a "short window" to invest -- this was a Barclays one that appears to have ongoing availability? Again, unless I have totally misunderstood the concept of ISAs altogether.

Also, assuming I can pay into the same one, can I pay into it as soon as the new tax year starts in April, or do I have to wait until the 1 year is up and invest again next August?

(I suspect these may be questions I should be directing at Barclays themselves rather than a forum, but I assumed somebody here would know)

eskbanker

aesthetic wrote: »

This didn't appear to have a "short window" to invest -- this was a Barclays one that appears to have ongoing availability? Again, unless I have totally misunderstood the concept of ISAs altogether.

Also, assuming I can pay into the same one, can I pay into it as soon as the new tax year starts in April, or do I have to wait until the 1 year is up and invest again next August?

(I suspect these may be questions I should be directing at Barclays themselves rather than a forum, but I assumed somebody here would know)

If the one you have is the same as the one they currently offer then as you say, it does seem that ongoing contributions can be made ("Deposits up to the annual ISA subscription limit each tax year may be made throughout the term of the Flexible Cash ISA"), in which case you could pay more into this one in April.

However, the rate for the currently-available product is a derisory 0.75% - if yours is anything like that then you'd be wasting time and money putting your money into it, when there are accounts offering nearly double that!

aesthetic

eskbanker wrote: »

If the one you have is the same as the one they currently offer[/URL] then as you say, it does seem that ongoing contributions can be made ("Deposits up to the annual ISA subscription limit each tax year may be made throughout the term of the Flexible Cash ISA"), in which case you could pay more into this one in April.

Yes that is exactly the one I have and I thought that was the case. So I suppose the final question is, how does the maturity work when it comes to the end of the term? I will have had 20k for 12 months, and whatever I pay in April for 4 months -- how do they calculate the interest?

eskbanker wrote: »

However, the rate for the currently-available product is a derisory 0.75% - if yours is anything like that then you'd be wasting time and money putting your money into it, when there are accounts offering nearly double that!

And yes, I agree the interest rate is awful. I have several other investments -- investment funds, shares, premium bonds -- which I view as "risky" where as I'm looking at the ISA as my "safe" option, something that is guaranteed and not affected by fluctuating markets etc. Do you suggest a savings account instead? Or am I looking at this all wrong and what I view as "risky" isn't actually risky at all? I'm investing for the long term. I just thought spreading it about was a good idea and having an ISA seemed like another "safe" string to the bow.

eskbanker

aesthetic wrote: »

Yes that is exactly the one I have and I thought that was the case. So I suppose the final question is, how does the maturity work when it comes to the end of the term? I will have had 20k for 12 months, and whatever I pay in April for 4 months -- how do they calculate the interest?

As with any other account, they do so on a pro rata basis, i.e. a full year's interest on £20K and then a third of the annual rate for whatever is added to the account for four months.

aesthetic wrote: »

And yes, I agree the interest rate is awful. I have several other investments -- investment funds, shares, premium bonds -- which I view as "risky" where as I'm looking at the ISA as my "safe" option, something that is guaranteed and not affected by fluctuating markets etc. Do you suggest a savings account instead? Or am I looking at this all wrong and what I view as "risky" isn't actually risky at all? I'm investing for the long term. I just thought spreading it about was a good idea and having an ISA seemed like another "safe" string to the bow.

You're right to see capital-protected deposit accounts as 'safer' than investments in that there isn't a risk of capital loss, but inflation risk comes into play if you're saving for a long time, i.e. their real-terms value declines when not keeping pace with inflation.

However, a cash ISA isn't safer than a taxable savings account as such - it does allow interest to be sheltered from income tax but for most that's not an issue given the personal savings allowance. In any case, it's almost always best to consider net return - any account paying 1% or more and being taxed at basic rate will outperform an ISA paying 0.75%, and there are both taxable and ISA accounts over 1.4% easy access and 1.8+% for taxable 12-month fixes.

Eco_Miser

aesthetic wrote: »

And yes, I agree the interest rate is awful. I have several other investments -- investment funds, shares, premium bonds -- which I view as "risky" where as I'm looking at the ISA as my "safe" option, something that is guaranteed and not affected by fluctuating markets etc.

The purpose of an ISA is to shelter its contents from tax. A cash ISA will save the income tax on the interest (20% of .75% of £20,000 in your case - £30 - except the first £1000 interest is charged at 0% anyway, so no saving); an S&S ISA will save the income tax on the dividends (and fixed interest from bonds), AND the Capital Gains Tax on your capital gains when you eventually sell, AND avoid you needing to keep detailed tax records of all your transactions (such as the internal dividend re-investment that occurs within an ACCumulation fund). So really you should be putting your risky investments (not Premium Bonds - not eligible and no point) in an ISA, not the 'safe' bank deposits.