Short term loan to 'carry forward' ISA allowance

point5clue

Hi All,
For the first time in my life I've been withdrawing from my ISA this year.  Its a flexible ISA and as  such I will have a lot of allowance by the end of the year.  Next tax year I will have a lump sum coming in and I am exploring the possiblilty of borrowing money short term just in time to refill the ISA plus this years £20, and then pay it back as soon as I can after the new tax year leaving a healthy allowance for another year.

Has anyone got any reccomendations for lender for this type of loan ?  Obviously the costs of doing this have to be low enough to not outweigh the savings of tax I would make.

Its a S&S ISA, but money would stay in cash obviously.

eskbanker

You could perhaps ask your current account provider if they'd support a personal loan?

Bigwheels1111

Bank of Mum & Dad. 😎

Reed_Richards

Potentially you will protect £40k from any taxes.  If it was a cash ISA earning 5% interest then you would get £2000.  I presume you don't have non-ISA savings to speak of so the tax you might pay would be the basic rate of income tax on £1000, so that's £200.  So your short term loan would save you £200 p.a.  If your lump sum was £100k then it would take you 5 years to get it all into ISAs but after 4 years the remaining interest would not be taxed so you would save yourself £800.  So the cost of your short term loan would need to be less than £800.  Of course this is all based on a lot of assumptions about your personal circumstances and about what will happen in future.

As a general rule, I think this means if your lump sum is N x £20k then the cost of your loan needs to be less that (N-1) x £200  

intalex

Hypothetically, it would be a 2-minute loan where you just need the provider to temporarily credit your account at 23:59 on 5th April and debit it again on 00:01 on 6th April. It could literally be an "optical" loan with no actual possibility of access to the loan and both transactions simply being reflected simultaneously on the statement on the morning of 6th April, and a fee for this "service" being charged/collected separately.

I haven't seen any financial institutions offering this but it would be a decent offering, and relatively easy to automate in a system, just not sure what else would be involved in being able to offer it (licenses, paperwork, etc).

Also, what would be a fair fee for this 2-minute optical loan with virtually zero risk? 0.05% of the value (18% APR) to cover the additional admin?

intalex

Some discussion on here too, though somewhat sidetracked due to misunderstanding over how flexible ISAs work:
https://forums.moneysavingexpert.com/discussion/6429997/1-day-bridge-loan-to-preserve-isa-allowance-on-flexible-isas