Paying off the mortgage ISA investment: should I have to declare it to HMRC? 16 December 2021 at 4:52PM in ISAs & tax-free savings 10 replies 315 views

Lord_Frugal12

Hello

I have an account with Aegon to pay off my mortgage. And that investment has reached the stage where I can pay off the mortgage. However, I asked Aegon if I could transfer these funds straight to my mortgage account with Nationwide. I was told that I have to transfer it to a current account. 

I spoke to Nationwide. And they too say that I have to pay in to a current account and then transfer it to Nationwide.

My question is this: 
ISA investments are supposed to be tax free. So, when I move these funds to Natwest where I have a current account, do I have to declare it to HMRC? 

I would really appreciate your advice, especially from those who had taken this ISA route to paying a mortgage. 

Thank you.  

masonic

No, there is no wealth tax and moving money from an ISA to a non-ISA account does not crystallise any taxable gain.

Lord_Frugal12

masonic said:

No, there is no wealth tax and moving money from an ISA to a non-ISA account does not crystallise any taxable gain.

Thanks for this information. 

I am still a bit nervous about this. So, to confirm, any funds I get from ISA need not be declared to HMRC? 

Albermarle

 So, to confirm, any funds I get from ISA need not be declared to HMRC? 

That is correct .

Lord_Frugal12

Albermarle said:

 So, to confirm, any funds I get from ISA need not be declared to HMRC? 

That is correct .

Thanks for this clarification. 

jimjames

Lord_Frugal12 said:

My question is this: ISA investments are supposed to be tax free. 

ISAs are not just supposed to be tax free, they are actually tax free. It's all part of their rules.

Lord_Frugal12 said:

masonic said:

No, there is no wealth tax and moving money from an ISA to a non-ISA account does not crystallise any taxable gain.

I am still a bit nervous about this. So, to confirm, any funds I get from ISA need not be declared to HMRC? 

Why would you need to declare it? The reason for the transfer is probably because the ISA account can't be used to make outgoing payments. The whole point of an ISA is that it is completely tax free so you can relax and pay off that mortgage without worrying!  Well done on the achievement of being mortgage free too! 

Lord_Frugal12

jimjames said:

Lord_Frugal12 said:

My question is this: ISA investments are supposed to be tax free. 

ISAs are not just supposed to be tax free, they are actually tax free. It's all part of their rules.

Lord_Frugal12 said:

masonic said:

No, there is no wealth tax and moving money from an ISA to a non-ISA account does not crystallise any taxable gain.

I am still a bit nervous about this. So, to confirm, any funds I get from ISA need not be declared to HMRC? 

Why would you need to declare it? The reason for the transfer is probably because the ISA account can't be used to make outgoing payments. The whole point of an ISA is that it is completely tax free so you can relax and pay off that mortgage without worrying!  Well done on the achievement of being mortgage free too! 

@jimjames

Thank you.

I still have one issue about cashing the ISA. Can I leave it in my bank? I mean, transfer the ISA investment and keep it in my savings account without having to pay tax?  

penners324

Yes. Do what you want with it

eskbanker

Lord_Frugal12 said:

I still have one issue about cashing the ISA. Can I leave it in my bank? I mean, transfer the ISA investment and keep it in my savings account without having to pay tax?  

You don't have any tax liability arising directly from the withdrawal as such, but any interest you earn on it thereafter is taxable income, although this may be taxed at 0% if you have headroom within your personal savings allowance:

https://www.moneysavingexpert.com/savings/tax-free-savings/

MX5huggy

Lord_Frugal12 said:

jimjames said:

Lord_Frugal12 said:

My question is this: ISA investments are supposed to be tax free. 

ISAs are not just supposed to be tax free, they are actually tax free. It's all part of their rules.

Lord_Frugal12 said:

masonic said:

No, there is no wealth tax and moving money from an ISA to a non-ISA account does not crystallise any taxable gain.

I am still a bit nervous about this. So, to confirm, any funds I get from ISA need not be declared to HMRC? 

Why would you need to declare it? The reason for the transfer is probably because the ISA account can't be used to make outgoing payments. The whole point of an ISA is that it is completely tax free so you can relax and pay off that mortgage without worrying!  Well done on the achievement of being mortgage free too! 

@jimjames

Thank you.

I still have one issue about cashing the ISA. Can I leave it in my bank? I mean, transfer the ISA investment and keep it in my savings account without having to pay tax?  

Once you move the money out of the ISA the income (interest) generated by that money becomes taxable whether you actually have tax to pay is down to your personal circumstances. 

Originally you said you were going to take money from the ISA put it in your current account and pay off your mortgage the current account probably does not pay interest and it would only be in that account for a few days anyway.  So no tax due. 

If now you’re taking £100k from your iSA and putting it in a savings account paying 3% then it’s likely  (if you pay income tax) that you will have to pay tax on the £3000 interest you will receive after 1 year. 

jimjames

Lord_Frugal12 said:

jimjames said:

Lord_Frugal12 said:

My question is this: ISA investments are supposed to be tax free. 

ISAs are not just supposed to be tax free, they are actually tax free. It's all part of their rules.

Lord_Frugal12 said:

masonic said:

No, there is no wealth tax and moving money from an ISA to a non-ISA account does not crystallise any taxable gain.

I am still a bit nervous about this. So, to confirm, any funds I get from ISA need not be declared to HMRC? 

Why would you need to declare it? The reason for the transfer is probably because the ISA account can't be used to make outgoing payments. The whole point of an ISA is that it is completely tax free so you can relax and pay off that mortgage without worrying!  Well done on the achievement of being mortgage free too! 

@jimjames

Thank you.

I still have one issue about cashing the ISA. Can I leave it in my bank? I mean, transfer the ISA investment and keep it in my savings account without having to pay tax?  

You could but why do that if you're not using it to pay off the mortgage. Wouldn't it be better to leave it inside the ISA?