Who are Cash ISA's useful for?

zagfles

There are several groups who could benefit from cash ISAs, especially if they fit more than one of these criteria:

• People who receive marriage allowance transfer and earn at the higher rate threshold (or sal sac down to the higher rate threshold)
  
• People who are subject to the high income child benefit tax (£50-60k income)
  
• People who are close to the personal allowance withdrawal threshold (£100k)
  
• People who claim tax credits (probably UC too)
• People who have kids at university getting means tested student loans. Or people who go to university themselves.
  

For all the above, all non-ISA interest counts and needs to be declared, even if it's within the savings allowance and so no tax to pay. All non-ISA interest counts towards "adjusted net income" used for PA withdrawal and HICB tax. Same for student loans. Same for tax credits (except there's a £300 disregard for all "other income" which includes interest).

masonic

zagfles said:

There are several groups who could benefit from cash ISAs, especially if they fit more than one of these criteria:

• People who receive marriage allowance transfer and earn at the higher rate threshold (or sal sac down to the higher rate threshold)
  
• People who are subject to the high income child benefit tax (£50-60k income)
  
• People who are close to the personal allowance withdrawal threshold (£100k)
  
• People who claim tax credits (probably UC too)
• People who have kids at university getting means tested student loans. Or people who go to university themselves.
  

For all the above, all non-ISA interest counts and needs to be declared, even if it's within the savings allowance and so no tax to pay. All non-ISA interest counts towards "adjusted net income" used for PA withdrawal and HICB tax. Same for student loans. Same for tax credits (except there's a £300 disregard for all "other income" which includes interest).

Those are interesting exclusions I've not come across before. I'd always assumed a large stash of cash in an ISA would be included in a means test and even a full years allowance would push you above the upper limit for a claim. Presumably any amount less than £20k could be put into an ISA as the need arises, so no need to compromise on the off-chance of making a claim in the future. Does this just count for income, or is capital in a cash ISA also excluded from a means test?

What about S&S ISAs? Interest/dividends excluded from income? Capital excluded from means test?

zagfles

masonic said:

zagfles said:

There are several groups who could benefit from cash ISAs, especially if they fit more than one of these criteria:

• People who receive marriage allowance transfer and earn at the higher rate threshold (or sal sac down to the higher rate threshold)
  
• People who are subject to the high income child benefit tax (£50-60k income)
  
• People who are close to the personal allowance withdrawal threshold (£100k)
  
• People who claim tax credits (probably UC too)
• People who have kids at university getting means tested student loans. Or people who go to university themselves.
  

For all the above, all non-ISA interest counts and needs to be declared, even if it's within the savings allowance and so no tax to pay. All non-ISA interest counts towards "adjusted net income" used for PA withdrawal and HICB tax. Same for student loans. Same for tax credits (except there's a £300 disregard for all "other income" which includes interest).

Those are interesting exclusions I've not come across before. I'd always assumed a large stash of cash in an ISA would be included in a means test and even a full years allowance would push you above the upper limit for a claim. Presumably any amount less than £20k could be put into an ISA as the need arises, so no need to compromise on the off-chance of making a claim in the future. Does this just count for income, or is capital in a cash ISA also excluded from a means test?

What about S&S ISAs? Interest/dividends excluded from income? Capital excluded from means test?

For tax credits and student loans there are no capital rules whatsoever, but you do need to declare non-ISA interest & dividends. For tax credits there's a £300 disregard for the total of "other income" which includes stuff like interest, dividends and pensions etc. For student loans there's no disregard, all non-ISA interest & dividends have to be declared. Any ISA income whether interest or dividends is totally ignored for both.

UC does have capital rules and ISAs will count towards the capital - just had a quick look and it probably wouldn't make any difference whether in an ISA or not as it uses "tariff income" which is effectively a capital tax (so ignore the "probably UC too" above - but could use a pension instead...)