ISA Advice

Psyduck1980

I’m a bit confused about how ISAs work and I was wondering if anyone could help me out with some specific questions. 

Context - I have a Stocks & Shares ISA with Invest Engine with about £200 in and I expect to deposit a further £75 by the end of the tax year. I don’t have a Cash ISA. I am a basic rate tax payer.  

Questions:

1. If I have earned in excess of £1,000 in interest in 2023/24 do I need to submit a self assessment? If so is that due in January 2025?

2. Can I set up a 1 year fixed rate Cash ISA now with an initial deposit of approximately £19,400? This is £20,000 less £275 less the interest expected between now and the end of the tax year less a small buffer? 

3. Can I add a further £19,300 (£20,000 less the interest expected between 6th April and the end of the fixed term less a small buffer) on 6th April or would I need to take out a new Cash ISA, possibly with a separate provider? 

4. What happens at the end of the fixed term (January 2025) if the variable rate is poor? Can I transfer the whole balance (circa £40k) to a new Cash ISA or only £20k? 

Thanks in advance.

eskbanker

Psyduck1980 said:

1. If I have earned in excess of £1,000 in interest in 2023/24 do I need to submit a self assessment? If so is that due in January 2025?

Unless you're already self-assessing, you don't need to start doing so unless the savings interest exceeds £10K.  HMRC will be notified by the institutions of the interest you've been paid, and can then adjust your 2025/26 tax code later on if anything needs to be collected.

Psyduck1980 said:

2. Can I set up a 1 year fixed rate Cash ISA now with an initial deposit of approximately £19,400? This is £20,000 less £275 less the interest expected between now and the end of the tax year less a small buffer? 

The £20K annual limit relates only to contributions, so you don't need to make any adjustment for interest.

Psyduck1980 said:

3. Can I add a further £19,300 (£20,000 less the interest expected between 6th April and the end of the fixed term less a small buffer) on 6th April or would I need to take out a new Cash ISA, possibly with a separate provider? 

As above, no need to adjust for interest - you can pay £20K into your existing account if it still accepts contributions then, or a different one if it doesn't (or if you choose to).

Psyduck1980 said:

4. What happens at the end of the fixed term (January 2025) if the variable rate is poor? Can I transfer the whole balance (circa £40k) to a new Cash ISA or only £20k? 

You can transfer it all - the rule is simply that all current year money must be in the same place.

Psyduck1980

Thanks very much Eskbanker. I have added a fourth question if you can answer that one too. 

Reed_Richards

Psyduck1980 said:

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4. What happens at the end of the fixed term (January 2025) if the variable rate is poor? Can I transfer the whole balance (circa £40k) to a new Cash ISA or only £20k? 

You can transfer the whole balance, be it £40k or £400k (or any other sum).  The £20k restriction only applies to the amount of new money you can deposit in the current tax year,  The ISA rules impose no restrictions on what you do with ISAs from previous tax years.    

Albermarle

I’m a bit confused about how ISAs work 

If you spent some time reading through this forum you would almost certainly be less confused.