Is fixed term isa monthly interest new money when paid into another isa?

HeparGirl24

Hi.

My father had a Lloyds fixed rate isa mature on 31 March. He had the interest paid monthly as it helps towards his care costs. Unfortunately he missed the "auto renew" period (got the letter but forgot to tell me about it)  so on maturity it converted to a instant cash isa.  I helped him opened a new fixed rate isa online as soon as we realised,  but as he will need some of the original capital fairly soon anyway we made a partial transfer.  Lloyds gave him a choice of accounts to receive the monthly interest so he chose to have it paid back into the converted instant cash Isa.

His care needs vary from month to month so he doesn't always need to use the savings interest and his reasoning was it could earn some tax free interest in the months he doesn't need it.

My question is, does this fixed rate isa monthly interest count as "new" money when it arrives in his instant cash isa ? He has a bond coming out later in the year which he intends to put into a new 2024/25 fixed term Isa so he needs to know if he can still use his full £20000 or not.

Many thanks.

RobfromCornwall

What you describing is ISA funds from previous tax year(s), so not new money.

He will still have 20k allowance for the 24-25 tax year. 

refluxer

Paying monthly interest out of one ISA and into another is a pretty unusual scenario and not many people here will have done this I would imagine, so you may need to contact Lloyds for a definitive answer. Be warned, though, that it's not uncommon for banking staff not to fully understand how their ISA products work - many on here have been given incorrect information via this route in the past.

Despite the fact that the money isn't technically leaving the 'ISA wrapper', you would need to check if the payments count as ISA transfers because if they don't, there's a chance they will count towards the 2024-25 allowance. 

Reed_Richards

If you want to make an ISA transfer it has to be done by "pull"; you ask the provider of the new ISA to "pull" the cash over from the old one.  What you are describing is ISA transfer by "push"; you arranged for money to come out of one ISA and then be deposited into a new one.  I suspect you will find that this does not count as a bona fide ISA transfer, unfair as that may seem.      

35har1old

HeparGirl24 said:

Hi.

My father had a Lloyds fixed rate isa mature on 31 March. He had the interest paid monthly as it helps towards his care costs. Unfortunately he missed the "auto renew" period (got the letter but forgot to tell me about it)  so on maturity it converted to a instant cash isa.  I helped him opened a new fixed rate isa online as soon as we realised,  but as he will need some of the original capital fairly soon anyway we made a partial transfer.  Lloyds gave him a choice of accounts to receive the monthly interest so he chose to have it paid back into the converted instant cash Isa.

His care needs vary from month to month so he doesn't always need to use the savings interest and his reasoning was it could earn some tax free interest in the months he doesn't need it.

My question is, does this fixed rate isa monthly interest count as "new" money when it arrives in his instant cash isa ? He has a bond coming out later in the year which he intends to put into a new 2024/25 fixed term Isa so he needs to know if he can still use his full £20000 or not.

Many thanks.

Looks like it's just a standard cash transfer and not a partial ISA tranfer as it is coming out of a fixed ISA partial transfers would not be available 

saajan_12

Usually ISA interest on old money kept in the same ISA account , counts as old money. 
If it's paid out to another account that's probably as a normal bank transfer without retaining the ISA marker. 
If the receiving account is a Isa, it may not be able to see the flag and hence cant tell the difference between that and new money. 

Nate, I say probably because lloyds may have a different feature to keep it within the ISA wrapper but a new account. You need to check with them.