Cash ISA query

Chrissy2k2

I’m sorry if this is an obvious question but I’m confused despite reading the posts 😬
I’ve never been lucky enough to have savings, but have recently lost my mum and dad so have some money to put in to a cash ISA for my retirement. I have put 20k in one and know this is the tax free amount each year. Does this mean I can open another one on the 6th April with 20k in and not pay tax on the 40k? (Spread over two accounts) 
thanks so much for your help 

slinger2

Yes that's true. You can open another one (or more) or (if allowed) you could add to the first one you have.

The restriction is on the amount of "new" money you can add each tax year. You can have 1 Cash ISA or 10, there's no limit. So on 6 April you could open 2 new ISAs with 10k in each.

Chrissy2k2

slinger2 said:

Yes that's true. You can open another one (or more) or (if allowed) you could add to the first one you have.

The restriction is on the amount of "new" money you can add each tax year. You can have 1 Cash ISA or 10, there's no limit. So on 6 April you could open 2 new ISAs with 10k in each.

Thank you so much, that’s really helpful. So if for example I ended up with 4 ISA’s over the next 4 years, each with 20k in (I won’t, but just for example), and withdrew the interest to spend, I wouldn’t have to pay tax? Hope that makes sense 

slinger2

There no tax on a Cash ISA and there's no tax to pay when you withdraw money from a Cash ISA.

Except in the case of "flexible" ISAs the system doesn't really distinguish between interest and anything else when you withdraw it. For instance if you put £20k in a Cash ISA and then get £1k interest after a year. You could withdraw £1k from the ISA (imagining it is the interest) and you'd pay no tax. Or you could withdraw £2k or £3k or £100 and you'd also pay no tax.

The advantage of leaving the interest in the ISA is that it starts compounding. In the 2nd year you've now got 21k in the ISA so that's x% of £21k interest in the 2nd year.

Chrissy2k2

Thank you so much @slinger2, you’ve explained it really well, very grateful 🙏🏼

jimjames

Chrissy2k2 said:

I’ve never been lucky enough to have savings, but have recently lost my mum and dad so have some money to put in to a cash ISA for my retirement. 

If it's for retirement have you considered adding it to a pension? Depending on your age saving in cash ISA is unlikely to give the best long term returns especially if you're removing the interest from the account.

Chrissy2k2

jimjames said:

Chrissy2k2 said:

I’ve never been lucky enough to have savings, but have recently lost my mum and dad so have some money to put in to a cash ISA for my retirement. 

If it's for retirement have you considered adding it to a pension? Depending on your age saving in cash ISA is unlikely to give the best long term returns especially if you're removing the interest from the account.

Thanks @jimjames, I’m 55 and I’ve just taken early retirement, although still carrying out some bank work and contributing to a pension, this money is from my lump sum and I will also be getting some inheritance from my Mum and Dad and just wanted the best return but to still be able to access if needed. I’ve never had much in the way of savings so it’s all new to me, I don’t want to waste it. I feel very grateful to be in this position if a bit overwhelmed with options!