ISA interest monthly paid into another account

toolazyto

If my ISA pays the interest monthly into another account is that a bad idea?

For example if the interest goes into a normal debit account do I pay tax on it?

molerat

The interest is tax free wherever it is paid into.   Is it a bad idea ?  By having it paid out of the ISA you are moving it out of the tax free wrapper.  Keeping it in the ISA means it remains tax free and can be moved into another ISA at a later stage without affecting your ISA input limits.

RobM99

...depends on rates. 5% taxed is better than 2% tax free!

refluxer

The other thing to bear in mind is that if you withdraw the interest every month, you'll only achieve the gross interest rate and not the AER.

Reed_Richards

It's quite a good idea if you plan on spending the money that arrives in the other account and a bad idea if you don't want to spend that money.