ISA fundamental questions

xh123

Hello

Despite considering myself a fairly intelligent person I still struggle with ISA rules! Any guidance would be great.

My wife and I are higher rate tax payers and keen to keep earnings under 100k due to childcare allowances. My wife sold a property a couple of years ago and put the cash into ISAs. 

We have some money left over each month which we wish to save tax effectively but may need some of this money at fairly short notice for life expenses. 

Her ISA portfolio:

£20,000 22/23 - cash 
£20,000 23/24 - cash 
£15,000 24/25 - S&S

my ISA portfolio

£14,000 23/24 - Cash
£3,000 24/25 - S&S

my questions:

1. I’m assuming there’s no such thing as joint ISA that we can put our monthly savings in?
2. When I opened my cash ISA the rate was 5%, now it’s 1.4% - if I move that into this years ISA allowance what happens to that old ISA? Does it get closed down and the ability to put money in goes forever? 

3. We may wish to withdraw all of our ISAs when we buy a new house, what happens with tax liability then? It only matters if it’s sat in an account creating interest? 

4. What’s the best type of account for monthly savings? Something like an easy access cash ISA with unlimited withdrawals?
5. if interest takes my wife’s previous years ISA pot over £20k, is that an issue?

Have I missed anything obvious?! 

Thank you 

Olinda99

5. interest added does not affect the 20K limit you can put 20K in a year 

4. you may get a better interest rate if you open something like a four access ISA - for example nationwide and coventry building society have these (you are only allowed to take money out four times a year before the interest rate drops)

3. if you will draw money then you don't create a tax liability or anything you just get the money that's in the ISA to do what you want with

2. if you do an isa transfer and transfer all the money out of an old isa to a new one then normally the old isa gets closed down. if you want to keep the old isa open then leave for example a pound in it

masonic

1. Your assumption is correct.

2. You can transfer your ISA to a better one using your new provider's ISA transfer process.

3. Correct.

4. There aren't many regular saver ISAs available, you may be able to use one of these, or easy access, or a notice account, depending on how quickly you might need the money.

5. No, there are a lucky few with over £1m in ISAs.

Mark_d

1.  The answer is in the name.  "I" is for "Individual".
2.  ISA is about how much you can contribute into a tax free space each year.  If an existing account is performing poorly, you can transfer to a new ISA provider.  Don't let the previous years ISA allowances be wasted by withdrawing cash and feeding some of that money in to a new ISA account.

3.  Anything in an ISA is free from income tax and capital gains tax so you will have no tax liability when you sell shares/withdraw cash.

4.  I believe the best use of the ISA allowance is to protect a stocks & shares investment from dividend tax and capital gains tax.  I would therefore put a monthly investment into a stock & shares ISA.  Within a stocks & shares ISA there are a multitude of investment options - from high risk shares to low risk government bonds...possibly even cash funds.
5.  The £20k allowance is the amount of money YOU can pay in.  Any increases in the account value due to interest/dividends/capital growth have no impact on the £20k allowance.

Albermarle

Despite considering myself a fairly intelligent person I still struggle with ISA rules! Any guidance would be great.

In addition to the answers already given, if you spent some time scrolling through the forum, then I am sure you will not struggle with ISA rules anymore. 

xh123

Thanks for the replies, very helpful.

One last question - if I wanted to put some of this years allowance in the 23/24 ISA (as I have under £20k in it) am I able to do that? Or is it ‘locked’ and I can only put money in ISAs opened this tax year?

gravel_2

xh123 said:

Thanks for the replies, very helpful.

One last question - if I wanted to put some of this years allowance in the 23/24 ISA (as I have under £20k in it) am I able to do that? Or is it ‘locked’ and I can only put money in ISAs opened this tax year?

This depends on the type of product you opened and the particular Ts&Cs for it. The ISA rules don't restrict this.

Albermarle

The fact you have under £20K, or any amount in the 23/24 ISA is not relevant. The £20K is a limit on new contributions in each tax year.
If the 23/24 ISA is still open for new contributions ( it may or may not be) any money you add will be part of your £20K limit for ISA's for 24/25.
You can not use unused ISA allowance from a previous tax year ( if that was your question) in the current tax year.
It is use it or lose it.

elkiedee

You can definitely do better than 1.4% - you need to choose a new ISA, whether with a different provider or the same one, which accepts transfers in. You can see whether your current provider offers a suitable product with a better rate - you might need to move but once you've transferred money that should pay off. Then to keep the tax free status you need to open an account and ask the provider of your new account to transfer your old ISA money in.