ISA Allowance and year end

Mjsmithuwe

So this has confused me for a long time. I am aware these you can save 20K in an Isa each year and then allowance resets.

Can someone advise re what I’ve got currently and when I can next invest.

so in March of this year I invested 16.5K in an ISA to use last years allowance. That then comes back to me in March.

When can I open an ISA for this financial year? Would I have to wait till end of other ISA or can I open a new one now?

Also what’s the rule re topping up? Could I top up the old ISA to 20K or would that effect this years allowance?

gravel_2

You can do 20k per tax year. This resets 6 April every year. It's unconnected to when you deposited last year's money.

If your current ISA allows mid-term deposits then yes you can add to it and of course it will take from this year's allowance.

GrumpyDil

You can save 20k into isa's each tax year.

Previous years don't have any affect on that amount so you could pay 20k in now.

When you refer to coming back to you in March I'm guessing it had a 1 year fixed rate but it will have a carry on rate when the fixed element ends so won't come back to you but will stay in the account at the carry on rate. 

And no you can't top up your existing account to use up the balance if last year's allowance. 

etienneg

The "year" for ISAs is the tax year that always runs from 6th April one year to 5th April in the next. So, the 16.5K you paid in during March used (as you say) last year's allowance.

On 6th April 2014 we started a new tax year, so you had a new ISA allowance of 20K available from then. You could have used it all that day if you wanted. It sounds as though you haven't started using it yet, in which case you can open a new ISA at any time (until 5th April 2025) to used this allowance, or part of it. You don't have to wait for the old one to mature - the new allowance is quite independent. If you have enough money, that's how you get 20K per year into ISAs, and (if you don;t withdraw it) this total builds up.

So, you can open a new ISA using your new allowance. It depends on the T&Cs of the old ISA if you can add to it. It sounds like a one year product, so it's unlikely that the T&Cs will allow you to add any more money after the initial funding window (often 30 days). Wherever you put new money now, it counts against this year's allowance.

Newly_retired

Next March when the previous year’s ISA matures, don’t cash it in, or it will lose its tax free status - unless you need the money of course.

Mjsmithuwe

So to clarify it was a 1 year fixed rate cash isa that ends in march. 

I will need the money eventually so how does this effect taking it out? Why cant it be cashed in at the end of its fixed status?

Basically I will want access to it in the 2026/27 financial year - how does this effect tax if i take it out then?

gravel_2

You absolutely can cash it in when it matures. The other user is simply warning that if you DO cash it in then it loses ISA status. Ideally, if able, you would continue over the years topping up your ISA and accumulate a nice amount inside the tax-free wrapper.

Mjsmithuwe

I see so basically in the isa its protected until its taken out - once it is and its in another account then the interest earn would be taxable - thats makes sense thanks