Interest on ISA paid direct to current account

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82152221#Comment_82152221

No,

Suggest a good read through the forum will get you up to speed on ISA rules.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81308731#Comment_81308731

If the interest is generated from money deposited this tax year, you can put it back in the same flexible ISA, or into a new one ( flexible or not). If it is interest generated from money contributed in previous tax years, it has to go back to the ISA it came from.

If the money generating interest in the ISA is a mixture of old and new, I am not sure exactly how that would work. No doubt an ISA expert will be along soon to enlighten us.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82152325#Comment_82152325

As a postscipt to my 23 February 2025 post, I did indeed set up a Paragon flexible 15 month fixed rate ISA, by a combination of transfer in from a Charter easy access isa during 2024/25 tax year, followed by a new £20k subscription in 2025/26 tax year all within the 30 day funding window.

Interest was set up to payout to my current account on a monthly basis.

In February of this year, and in order to facilitate the return of the interest withdrawn, I had to set up a second easy access isa with Paragon ( all Paragon isa accounts are treated as a single unit for flexible purposes).

A total of £3,500 was repaid back into Paragon easy access, achieving my goal of living off the interest during the tax year, but arriving at a higher balance in the Paragon ISAs at the end of the tax year.

The whole processed was rinse and repeated in the current tax year when the original 15 month isa matured and a new 15 month one replaced it. Paragon were a great help in explaining and assisting in executing the process.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82152460#Comment_82152460

I did not realise it was an old thread, due to the newbie poster posing their question on an old thread, instead of starting a new one themselves.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82152479#Comment_82152479

I did notice it was old thread, but thought it might be useful to update for others on my experience, once it had been reawakened.

The thread was directly instrumental in my jumping on the Flexible isa bandwagon to my advantage.

xylophone

The interest that accrued in the ISA was free of tax.

If it is paid into an account that pays no interest, then there is no interest on that account to be taxed,

If paid into a non ISA, that pays interest, that interest is potentially liable to tax, depending on the account

holder's situation.