Cash ISA - does interest count as a deposit ?

friolento

Yellowman said:

With each interest payment, my ISA allowance increases by the value of this interest, allowing me to build beyond the £20,000 limit if required.

I am afraid, your ISA allowance does not increase by interest payments or by anything else. It is a flat £20,000 per annum.

dcs34

friolento said:

Yellowman said:

With each interest payment, my ISA allowance increases by the value of this interest, allowing me to build beyond the £20,000 limit if required.

I am afraid, your ISA allowance does not increase by interest payments or by anything else. It is a flat £20,000 per annum.

"ISA allowance" was the wrong terminology but I assume Yellowman means, by having the interest paid into the ISA account, that they are increasing the ISA balance by the £20,000 annual deposit + £x annual interest, thereby benefiting from it staying in the tax-free wrapper for future years.

brucefan_2

ZeroSum said:

A while back, I was told by one of the banks that monthly interest did count towards allowance but annual didn't. Possibly be why not many offer monthly interest as an option.

If an employee of any bank is stating this as official guidance/information to a (potential) customer, then that bank has serious issues with its induction and training programme(s).

There is no ambiguity or room for misunderstanding on this issue. 

Any interest earned in an ISA wrapper does not count in any way towards the overall £20k per annum ISA limit

Yellowman

dcs34 said:

friolento said:

Yellowman said:

With each interest payment, my ISA allowance increases by the value of this interest, allowing me to build beyond the £20,000 limit if required.

I am afraid, your ISA allowance does not increase by interest payments or by anything else. It is a flat £20,000 per annum.

"ISA allowance" was the wrong terminology but I assume Yellowman means, by having the interest paid into the ISA account, that they are increasing the ISA balance by the £20,000 annual deposit + £x annual interest, thereby benefiting from it staying in the tax-free wrapper for future years.

Yes, that is what I mean - it is the same with other flexible cash ISAs I have had.

The total monthly interest paid out increases the maximum tax-free amount that can be paid in within the same tax year (above the £20,000 maximum).

I am not sure what the correct terminology is but it generally shows on accounts as 'maximum amount that can be paid in'.

ZeroSum

brucefan_2 said:

ZeroSum said:

A while back, I was told by one of the banks that monthly interest did count towards allowance but annual didn't. Possibly be why not many offer monthly interest as an option.

If an employee of any bank is stating this as official guidance/information to a (potential) customer, then that bank has serious issues with its induction and training programme(s).

There is no ambiguity or room for misunderstanding on this issue. 

Any interest earned in an ISA wrapper does not count in any way towards the overall £20k per annum ISA limit

It was about 20 years ago, so no idea if true back then & things have changed. Normally with banking apps it'll tell you how much allowance you have left, but this was pre that. And flexible ISA'S didn't exist. I do find it odd though that most ISA'S do pay their interest annually with few options to have it paid away monthly. I did wonder if it was related.

Mind, saying that I have an IFISA with loanpad & they pay interest daily with no impact on allowance, so it clearly isn't true.

Yellowman

I find that Coventry BS, Skipton BS and Paragon Bank regularly offer flexible cash ISAs with a monthly interest option.

friolento

Yellowman said:

dcs34 said:

friolento said:

Yellowman said:

With each interest payment, my ISA allowance increases by the value of this interest, allowing me to build beyond the £20,000 limit if required.

I am afraid, your ISA allowance does not increase by interest payments or by anything else. It is a flat £20,000 per annum.

"ISA allowance" was the wrong terminology but I assume Yellowman means, by having the interest paid into the ISA account, that they are increasing the ISA balance by the £20,000 annual deposit + £x annual interest, thereby benefiting from it staying in the tax-free wrapper for future years.

Yes, that is what I mean - it is the same with other flexible cash ISAs I have had.

The total monthly interest paid out increases the maximum tax-free amount that can be paid in within the same tax year (above the £20,000 maximum).

I am not sure what the correct terminology is but it generally shows on accounts as 'maximum amount that can be paid in'.

The allowance is what you can pay into your ISA. Since you cannot pay yourself any interest, interest never counts towards your allowance. 

Your ISA balance can be way more than £20,000 but that still doesn’t change the fact that you cannot deposit more than your £20k annual allowance (each year, unless it’s a fixed term cash ISA which usually has deposit limitations).