Interest on an Isa

gelcal

I have interest on my isa accounts paid monthly into my current account. I only get interest on the first £5000 on my current account and have more than this in the account. I am liable for tax on the isa interest paid in monthly please ? Thankyou.

Keep_pedalling

No, interest from ISAs are tax free, whether you leave the interest in the ISA or have it payed to a non ISA account.

eskbanker

Once the money has been paid out of the ISA into the current account, any interest subsequently earned on it is subject to taxation....

JohnB47

Just checking. You have your ISA interest paid into your current account, which has more than £5000 in it. You do realise that you don't have to have the ISA interest paid out of that account - it is perfectly normal for it to be paid into that ISA account and it therefore remains tax free (and is not included in the £20000 per financial year ISA investment limit)?

As said by eskbanker, once you take money out of an ISA 'wrapper' (whether by a manual withdrawal or an arranged interest payment) it becomes subject to the normal tax rules.

DRS1

and why have you got more than £5k in your current account earning no interest (on the excess)?  Why not put the excess in a savings account - maybe one linked to the current account if you think you may need to transfer money back and forth.
Or if you have headroom you could put it in the ISA.

badger09

JohnB47 said:

Just checking. You have your ISA interest paid into your current account, which has more than £5000 in it. You do realise that you don't have to have the ISA interest paid out of that account - it is perfectly normal for it to be paid into that ISA account and it therefore remains tax free (and is not included in the £20000 per financial year ISA investment limit)?

As said by eskbanker, once you take money out of an ISA 'wrapper' (whether by a manual withdrawal or an arranged interest payment) it becomes subject to the normal tax rules.

BIB
The interest subsequently earned on money withdrawn becomes subject to the normal tax rules. 

JohnB47

badger09 said:

JohnB47 said:

Just checking. You have your ISA interest paid into your current account, which has more than £5000 in it. You do realise that you don't have to have the ISA interest paid out of that account - it is perfectly normal for it to be paid into that ISA account and it therefore remains tax free (and is not included in the £20000 per financial year ISA investment limit)?

As said by eskbanker, once you take money out of an ISA 'wrapper' (whether by a manual withdrawal or an arranged interest payment) it becomes subject to the normal tax rules.

BIB
The interest subsequently earned on money withdrawn becomes subject to the normal tax rules. 

Is your post meant as a correction to mine?

I can't see that there's anything wrong with what I said.

Once you take money out of an ISA 'wrapper' (whether by a manual withdrawal or an arranged interest payment) it becomes subject to the normal tax rules.

Yes, there are tax rules regarding interest earned on the withdrawn money but there are tax rules concerning the whole amount too. For example, if the ISA you have withdrawn money from is not a Flexible one, you can't return that money to that ISA and stay within the £20000 limit. If you invest it in another ISA, it is subject to the £20000 limit.

Those are tax rules which relate to the whole amount withdrawn, not just on any interest subsequently earned, are they not?

 

eskbanker

JohnB47 said:

badger09 said:

JohnB47 said:

Just checking. You have your ISA interest paid into your current account, which has more than £5000 in it. You do realise that you don't have to have the ISA interest paid out of that account - it is perfectly normal for it to be paid into that ISA account and it therefore remains tax free (and is not included in the £20000 per financial year ISA investment limit)?

As said by eskbanker, once you take money out of an ISA 'wrapper' (whether by a manual withdrawal or an arranged interest payment) it becomes subject to the normal tax rules.

BIB
The interest subsequently earned on money withdrawn becomes subject to the normal tax rules. 

Is your post meant as a correction to mine?

I can't see that there's anything wrong with what I said.

Once you take money out of an ISA 'wrapper' (whether by a manual withdrawal or an arranged interest payment) it becomes subject to the normal tax rules.

Yes, there are tax rules regarding interest earned on the withdrawn money but there are tax rules concerning the whole amount too. For example, if the ISA you have withdrawn money from is not a Flexible one, you can't return that money to that ISA and stay within the £20000 limit. If you invest it in another ISA, it is subject to the £20000 limit.

Those are tax rules which relate to the whole amount withdrawn, not just on any interest subsequently earned, are they not?

I'm not convinced that it's helpful to refer to 'tax rules' to cover entirely different things!

The point I had been making was that money withdrawn from an ISA into a taxable account isn't taxable as such by itself, it's only interest earned on that sum (and anything else in the account) that is deemed to be income for taxation purposes.

Redepositing money withdrawn from an ISA into the same or different ISA is indeed subject to ISA scheme rules but these wouldn't normally be labelled as 'tax rules' as such, and weren't what OP was asking about....

Petula

JohnB47 said:

Just checking. You have your ISA interest paid into your current account, which has more than £5000 in it. You do realise that you don't have to have the ISA interest paid out of that account - it is perfectly normal for it to be paid into that ISA account and it therefore remains tax free (and is not included in the £20000 per financial year ISA investment limit)?

As said by eskbanker, once you take money out of an ISA 'wrapper' (whether by a manual withdrawal or an arranged interest payment) it becomes subject to the normal tax rules.

Butting in here   I did read the rest of the thread but only got more confused.  With an ISA just started last year, full £20,000 in, the interest that has been added to that can just stay there - up to another £20,000 can be added the next fiscal year without having to take the interest that's been added into account? 

Re:  £20,000 ISA + £50(?) interest = £20,050.  Next "year" add another £20,000 - Total £40,050 until more interest added and so on...  Sorry about having to explain it to me like I'm 5 

jimjames

Yes, everything inside an ISA is tax free. Only limit is what YOU add, anything else doesn't count. BTW if you're only getting £50 per year interest on a £20,000 ISA you need to move it ASAP!

Petula

jimjames said:

Yes, everything inside an ISA is tax free. Only limit is what YOU add, anything else doesn't count. BTW if you're only getting £50 per year interest on a £20,000 ISA you need to move it ASAP!

Don't think it was much more than that in all honesty.  Suppose I best have a look around then!  Thank you for clarifying the whole interest thing and the heads up on the ISA