Confusion over tax on savings

eskbanker

vikkimcd said:

How will I be affected with the rest that I have to put somewhere until I can put it into another ISA in April 2026? If I put this into a normal savings account, will this interest count towards the total yearly allowance? 

Not sure I'm understanding the question - your ISA contribution allowance in any tax year is £20K (currently....), regardless of where that money has been prior to that?  Perhaps it'll help if you clarify exactly what you mean by 'this interest' and 'the total yearly allowance'?

Dazed_and_C0nfused

vikkimcd said:

Okay, thank you all so much for your comments. I think I understand it, and have been overthinking it. So I can put £20k in now. I can then put £20k into the same ISA after April 5th 2025, and the interest on these won't be taxed? 
How will I be affected with the rest that I have to put somewhere until I can put it into another ISA in April 2026? If I put this into a normal savings account, will this interest count towards the total yearly allowance? 

I think that question mark shows you really don't get the basic principle.

Interest earned within a Cash ISA is exempt from tax.

Interest from non ISA accounts is taxable.  There is no separate "allowance" for non ISA interest.  But depending on what your Personal Allowance is and what other income you have there might be no tax to pay on the first £18,570 of taxable interest.

Although for a lot of people it will the first £1,000 of taxable interest which incurs no tax liability.  As it is taxed at a 0%

vikkimcd

Yeh, I think I am still confused. I get the allowance bit. When I called my bank to ask about ISAs, she said the first £1k is tax free, but if you have other ISAs, then this will be on top of that, i.e. taxed, even though in an ISA. And no, I'm not misunderstanding, I  recorded the call and wrote down what she said. I think that is why I am confused. How can you have more than one ISA that earns over £1k, but not be taxed?

Dazed_and_C0nfused

vikkimcd said:

Yeh, I think I am still confused. I get the allowance bit. When I called my bank to ask about ISAs, she said the first £1k is tax free, but if you have other ISAs, then this will be on top of that, i.e. taxed, even though in an ISA. And no, I'm not misunderstanding, I  recorded the call and wrote down what she said. I think that is why I am confused. How can you have more than one ISA that earns over £1k, but not be taxed?

You genuinely are very confused.

ISA's are exempt from tax.  End of story.  There is no £1k allowance.  You can add £20k per tax year and providing you keep to the ISA rules any interest is exempt from tax.  Say interest rates were 10% and you had added £20k to an ISA on 6 April.  A year later you would have earned £2k in interest.  Which is exempt from tax.

There are completely different rules for taxable interest.

Depending on your other income and Personal Allowance you can have up to £18,570 interest each tax year without paying tax on it.
£12,570 Personal Allowance 
£5,000 savings starter rate band (0% tax rate)
£1,000 savings nil rate band (0% tax rate).

wmb194

vikkimcd said:

Yeh, I think I am still confused. I get the allowance bit. When I called my bank to ask about ISAs, she said the first £1k is tax free, but if you have other ISAs, then this will be on top of that, i.e. taxed, even though in an ISA. And no, I'm not misunderstanding, I  recorded the call and wrote down what she said. I think that is why I am confused. How can you have more than one ISA that earns over £1k, but not be taxed?

Ignore that call.

Isas are tax free. You could earn £1m in interest within an Isa and it would be tax free. £20k allowance per tax year. 

For taxable accounts, if you're a basic rate taxpayer you have a £1k 0% band for interest.

vikkimcd

Right, thank you. That is much clearer. ISAs are a separate thing, nothing that I put in is taxed, tick.
I have £18,570 to play with, so I think I may well be safe from tax. The savings account matured two weeks ago, so I am guessing any tax I owe would not need to be declared until later this year?

eskbanker

vikkimcd said:

Right, thank you. That is much clearer. ISAs are a separate thing, nothing that I put in is taxed, tick.
I have £18,570 to play with, so I think I may well be safe from tax. The savings account matured two weeks ago, so I am guessing any tax I owe would not need to be declared until later this year?

It's still unclear why you'd need to declare anything at all - you mentioned that your bank claims not to notify HMRC of interest paid but also highlighted that they'd told you factually incorrect stuff about ISA interest, so I'd be inclined to be sceptical about their trustworthiness.  Who is it?

vikkimcd

It's Halifax!
One last question if you don't mind?
So I'll put £20k into an ISA before April 5th 2025, then another £20k into a separate ISA/same one (?) after the new financial year starts. Do you have any recommendations for another almost £20k until April 2026?

PeskyBlunder

Have a look at https://moneyfactscompare.co.uk/isa/

eskbanker

vikkimcd said:

It's Halifax!
One last question if you don't mind?
So I'll put £20k into an ISA before April 5th 2025, then another £20k into a separate ISA/same one (?) after the new financial year starts. Do you have any recommendations for another almost £20k until April 2026?

If someone at Halifax stated or implied that they wouldn't notify HMRC of (non-ISA) interest paid then that can safely be ignored.

If you're looking for specific ISA products, the above link is a good place to start, but much will depend on your specific requirements, such as when you'll need access to the money - are you needing it specifically in April 2026?

https://www.moneysavingexpert.com/savings/best-cash-isa/ is a less comprehensive listing but has MSE-style explanatory narrative....