ISA interest tax free?

GCSCLC

hello. I’ve just got off of a lengthy call with hmrc regarding my tax codes. Long story short, because my interest earned from my ISA’s is paid directly into my current account, they are not tax free & I have to change my tax code to repay the extra untaxed interest I’ve earned. I didn’t see an option as to where I can pay my ISA interest. I thought it would automatically be tax free. Hard lesson learned it seems but just want to check, is it right that I have to pay tax on my ISA interest, purely because it’s sent to my current account?
thanks

refluxer

Interest earned within an ISA and paid out to your current account is tax-free - it's only the interest that this money generates going forward that won't be, as it's then outside of the ISA.

How are HMRC being notified about this ? The banks shouldn't be giving them this information so are you (mistakenly) including it in your self-assessment tax form ?

eskbanker

Who paid you the interest that HMRC are referring to - the ISA provider, or the current account provider, or both?

GCSCLC

Barclays are my current account & isa account

GCSCLC

refluxer said:

Interest earned within an ISA and paid out to your current account is tax-free - it's only the interest that this money generates going forward that won't be, as it's then outside of the ISA.

How are HMRC being notified about this ? The banks shouldn't be giving them this information so are you (mistakenly) including it in your self-assessment tax form ?

I don’t pay self assessment. I’m PAYE. It’s purely the interest from my savings that have gone over the £1000 grace that has lead to the owed money from previous tax years

TheSpectator

So either Barclays are reporting your ISA interest incorrectly or you are generating interest in your current accounts.

GCSCLC

TheSpectator said:

So either Barclays are reporting your ISA interest incorrectly or you are generating interest in your current accounts.

I just have a basic barclays current account. I assume they don’t pay much interest? I can’t find any details saying they do?

400ixl

So your ISA pays your interest out to your savings account. How much is in that savings account and what is the interest rate.

You should be having the ISA interest paid into the ISA account.

GCSCLC

400ixl said:

So your ISA pays your interest out to your savings account. How much is in that savings account and what is the interest rate.

You should be having the ISA interest paid into the ISA account.

I assumed it would. I don’t even remember getting a choice to pay into into my current account. & it’s paid into a current account. I don’t have a savings account

eskbanker

GCSCLC said:

my interest earned from my ISA’s is paid directly into my current account

Are they definitely ISAs?  There was a recent thread where someone thought they had ISAs but they were referring to 'Instant Saver Accounts', which led to some confusion - can you clarify exactly what the product names are?

GCSCLC

I did try to explain this to hmrc, saying that all money from Barclays was from an isa but she kept saying if its interest into bank then it counts towards savings allowance. Really don’t fancy another hour on hold to have that conversation again!