Cash rules and interest have I got this right?

immy1

Anyone clarify these questions regarding cash  ISA's and interest earned please?

Myself and my spouse opened a cash ISA for £20000  each this tax year. The money came from our joint account. Is this fine to open two cash ISAs from a joint account one for him and one for me?

When the ISA's mature and say they both make e.g. £500.00 interest  can we then transfer £20,500.00 each into a new ISA  next tax year whilst also opening another cash ISA with a further £20,000.00 each in the same year? Or will this take us both over the limit?

What is confusing me is the interest accrued within the ISA as I am thinking you can only pay in £20000.00 a year each so maybe opening a new ISA for £20,000 next year takes us over the limit if we both then transfer £20,500.00 to an new ISA with last years funds? 

mebu60

It's £20k of new money each in a tax year (currently). Interest received and previous years' subscriptions don't count. 

refluxer

I can't answer the joint account question (although I suspect that will be fine) but you'll be free to do what you like with your maturing fixed rate cash ISAs next year as the £20k ISA allowance only applies to new subscriptions ('new money') paid into an ISA (or ISAs) each tax year - transfers of ISAs funded in previous tax years don't count towards that allowance and neither does any interest earned within an ISA.

slinger2

There's a limit of £20,000 that you can pay into ISAs each tax year, but there's no limit on how much money can be in an ISA. Could be a million pounds. So don't worry about the ISA having £20,500 in it, or £40,000 or £60,000, it's not an issue.

immy1

That's cleared it up thank you both.  I did an internet search first but was none the wiser. I had no idea that you could also put  the interest in as thought it would have exceeded the limit.

Peter999_2

Yes, that's fine to do.   For example, one of my ISAs matured this year and I got £21,360 back including the internet.   I then opened a new cash ISA with another provider (very good interest rate) and transferred the £21,360 into that account paying 4.5%.     All of the £21,360 remains tax free and when the ISA matures it will be 4.5% on the £21,360.

On the same day, I took out another £20,000 cash ISA with the same provider using this years allowance so I've now got 2 cash ISAs with them.    

Ayr_Rage

ISAs are wonderful, I've been in since the beginning, never paid a penny of tax on interest or dividends and no CGT.

Current total £837,452.30

Isarulesaretoocomplex

Ayr_Rage said:

ISAs are wonderful, I've been in since the beginning, never paid a penny of tax on interest or dividends and no CGT.

Current total £837,452.30

Do you have this with several institutions just with the 85k protection scheme 

Ayr_Rage

Isarulesaretoocomplex said:

Ayr_Rage said:

ISAs are wonderful, I've been in since the beginning, never paid a penny of tax on interest or dividends and no CGT.

Current total £837,452.30

Do you have this with several institutions just with the 85k protection scheme 

£43,000 in a cash ISA with Trading 212, the rest in a S&S ISA with HL so no worries as I am the beneficial owner of my investments.

immy1

Thanks Ayr-Rage  Yes we haven't gone over the 85k limit. Thank for the reminder.

jimjames

immy1 said:

That's cleared it up thank you both.  I did an internet search first but was none the wiser. I had no idea that you could also put  the interest in as thought it would have exceeded the limit.

Just to clarify this. You don't "put" the interest in. It is automatically added to the ISA by the bank so no action is needed on your part, you just leave it inside the account to continue to be tax free and earn more interest.