Cash ISA interest £1000 question

Annie3465

Hello everyone. I really struggled with numbers and anything money related. My question is:-

If I earn over £1,000 in interest in my cash ISA, what happens? If I don't get taxed on ISA interest, why is it mentioned? I might go over the £1,000 in interest but not by much.

I've slowly saved money in an ISA for years. And it is for emergencies only or when I retire to keep the heating on.

I would be grateful for any help. Thanks.

This is the ISA article, which mentions it. So that's why I'm really confused. It's in the big about ISA.

Who are ISAs best for?

Since 2016, the personal savings allowance (PSA) means you get a tax-free amount of interest, earnable in any savings...

Basic 20% rate taxpayers can earn up to £1,000/year tax-free interest

Higher (40%) rate taxpayers can earn £500/year tax-free

Top (45%) rate taxpayers don't get a PSA

Remember, that's the interest you can earn, so you need a lot of savings to generate it. And with very low savings interest rates between 2016 and 2022, very few paid tax on savings interest. At one point, you needed around £250,000 in top easy-access savings to generate it.

But, now rates have risen, basic rate taxpayers only need around £20,000 in normal savings to pay tax on it.

Thanks for all the replies.

booneruk

There's no tax of any kind on money kept in an ISA 

Interest from money not in an ISA can be taxed though, and usually people get a zero tax allowance on the first £1000 of that.

Ayr_Rage

ISA interest in NEVER subject to tax.

That's it.

Growingold

Annie3465 said:

Hello everyone. I really struggled with numbers and anything money related. My question is:-

If I earn over £1,000 in interest in my cash ISA, what happens? If I don't get taxed on ISA interest, why is it mentioned? I might go over the £1,000 in interest but not by much.

I've slowly saved money in an ISA for years. And it is for emergencies only or when I retire to keep the heating on.

I would be grateful for any help. Thanks.

Not clear what you mean. Where is it mentioned?  ISA interest is non taxable no matter how much.  Only interest payments made on money held in non ISA accounts could be taxable if you exceed your tax free interest allowance which varies depending on what rate of tax payer you may be.

jimjames

Annie3465 said:

If I earn over £1,000 in interest in my cash ISA, what happens? If I don't get taxed on ISA interest, why is it mentioned?

Where is it mentioned? The only mention I've ever seen is for interest on savings outside an ISA. Anything inside an ISA can be completely disregarded for tax purposes.

lr1277

The rate is mentioned to help you decide whether to choose that ISA or whether to keep putting money in that ISA. Most people choose an ISA based on the rate, but there are other potential considerations such as whether it is a flexible ISA, withdrawal conditions, which institution et al.
If you decide you can do better than your current ISA rate, if you are not aware, open the new ISA, then ask the new provider to bring the funds across from your old ISA. Do not take the money out of the old ISA as then you will lose all the ISA benefits. 

I hope I understood your question and replied accordingly.

Dazed_and_C0nfused

Annie3465 said:

Hello everyone. I really struggled with numbers and anything money related. My question is:-

If I earn over £1,000 in interest in my cash ISA, what happens? If I don't get taxed on ISA interest, why is it mentioned? I might go over the £1,000 in interest but not by much.

I've slowly saved money in an ISA for years. And it is for emergencies only or when I retire to keep the heating on.

I would be grateful for any help. Thanks.

You appear to be conflating two things.

Interest from a cash ISA is exempt from tax.  The amount you can earn in tax exempt interest is only limited by how much capital you can get into your ISA and the interest rate.

The £1,000 you are doubtless referring to relates to taxable interest, from accounts that aren't an ISA.  

No connection between the two things.

VNX

Annie3465 said:

Hello everyone. I really struggled with numbers and anything money related. My question is:-

If I earn over £1,000 in interest in my cash ISA, what happens? If I don't get taxed on ISA interest, why is it mentioned? I might go over the £1,000 in interest but not by much.

I've slowly saved money in an ISA for years. And it is for emergencies only or when I retire to keep the heating on.

I would be grateful for any help. Thanks.

Nothing happens 

Annie3465

Growingold said:

Annie3465 said:

Hello everyone. I really struggled with numbers and anything money related. My question is:-

If I earn over £1,000 in interest in my cash ISA, what happens? If I don't get taxed on ISA interest, why is it mentioned? I might go over the £1,000 in interest but not by much.

I've slowly saved money in an ISA for years. And it is for emergencies only or when I retire to keep the heating on.

I would be grateful for any help. Thanks.

Not clear what you mean. Where is it mentioned?  ISA interest is non taxable no matter how much.  Only interest payments made on money held in non ISA accounts could be taxable if you exceed your tax free interest allowance which varies depending on what rate of tax payer you may be.

I think I understand now, I've edited my post to show the info quoted. I do struggle with understanding this type of stuff. Thanks for replying so quickly.

jimjames

The link your text is from is here: https://www.moneysavingexpert.com/savings/best-cash-isa/

And I agree it is a bit confusing as the page is about ISAs yet begins by talking about non ISA allowances and even more confusingly uses an example £20,000 that is exactly the same as the annual ISA allowance.

But back to your question, if all your savings are in an ISA then you don't need to worry about tax

Annie3465

Thanks, I understand now.