ISA question re. max 20,000 limit

devon123

Hi

I haven't ever opened an ISA and I'm not entirely sure I understand the rules. I have looked on here and a few other places to try to clarify!

I have 20k to invest. Do I need to make sure I invest less than that to make sure I don't go over 20k by the end of the tax year, or can I invest 20k and still won't be taxed on the savings even though the interest will take me over 20k after the first month?

I found this online "Remember; the allowance is only applicable to the amount of money you deposit into ISAs during the tax year (you’re not capped at £20,000 for your deposits + the gains)" which I think means I can invest 20k and pay no tax at all on any interest?

Thanks for any help!

devon123

.....also if I have 20k to invest, which interest option is the best please?

4.96% annually    or

4.85% monthly

Albermarle

devon123 said:

Hi

I haven't ever opened an ISA and I'm not entirely sure I understand the rules. I have looked on here and a few other places to try to clarify!

I have 20k to invest. Do I need to make sure I invest less than that to make sure I don't go over 20k by the end of the tax year, or can I invest 20k and still won't be taxed on the savings even though the interest will take me over 20k after the first month?

I found this online "Remember; the allowance is only applicable to the amount of money you deposit into ISAs during the tax year (you’re not capped at £20,000 for your deposits + the gains)" which I think means I can invest 20k and pay no tax at all on any interest?

Thanks for any help!

You are talking about investing ( as in stocks and shares) but I think you mean Saving, so are looking at Cash ISA's .
The whole point of an ISA is that the interest you earn is never taxable. So if you add the max £20K then any interest stays in the Cash ISA. It does not matter if the total figure is over £20K, as long as you do not add more than £20K of new money per tax year.

You can earn a certain amount of interest tax free in a non ISA savings account, which usually have a little bit higher interest rates, so you may not need to use an ISA at all.

There is a sub forum just about ISA's so have a read through that.
ISAs & tax-free savings — MoneySavingExpert Forum

Plus have a read through this 
ISAs & tax-free savings — MoneySavingExpert Forum

InvesterJones

The 20k limit is for your contributions. What they grow to is irrelevant.

4.96% annually is the same as 4.85% monthly with the interest reinvested and compounded.

devon123

Thanks. That's really helpful. Yes, I mean cash to save, sorry.

I have 65k in total which has just been sitting in a regular savings account. I am a basic rate tax payer. I also have a 7k emergency pot. 

I am just trying to work out what to do with it. I will need the 65k in a years time for a house extension.

Any suggestions gratefully received. 

friolento

InvesterJones said:

The 20k limit is for your contributions. 

this is your annual allowance, where the year is the tax year.

That's at least the current legislation. The Chancellor might well change this in the October Budget.

Albermarle

devon123 said:

Thanks. That's really helpful. Yes, I mean cash to save, sorry.

I have 65k in total which has just been sitting in a regular savings account. I am a basic rate tax payer. I also have a 7k emergency pot. 

I am just trying to work out what to do with it. I will need the 65k in a years time for a house extension.

Any suggestions gratefully received. 

Put £20K into a cash ISA, and the rest in a non ISA savings account ( you will probably end up paying a bit of tax, but not the end of the world) 
With Cash ISA's or non ISA's you have a choice.
Easy access
Limited access ( say 3 withdrawals a year allowed_
Notice accounts ( you have to give 30,60,90 days notice of withdrawal)
Fixed rate/Fixed term ( one year max in your case)

There is a list of best accounts in the link I sent you already.