COMPETE ISA NEWBIE - HELP PLEASE!!

19Flash56

Hello all
I am completely new to the world of ISA 
I have read the Descriptions on each ISA type on MSE website, but still a bit confused
I have recently had a bond mature and wish to protect the money from tax by investing in a cash ISA

I wish to invest £20,000 in total.
I want to withdraw the interest ONLY at the end of each tax year, but still keep £20,000 invested for the following tax year. 

Is this possible to do with a Cash ISA, or if not, which ISA type should I be looking at, just to have the benefit from interest each year

Many thanks for your help!!

XzavierWalnut

Yes you can do this with a cash ISA. When you fill the application form in, it asks where you want the interest to be paid. It can either stay in the cash ISA, or like what you wish to do, pay into another account, which could be your current account.

MEM62

19Flash56 said:

I have recently had a bond mature and wish to protect the money from tax by investing in a cash ISA

Not being pedantic for the sake of it, but for clarity - you do not invest is a cash ISA.  Cash is savings.  S&S / equities are investments.    

refluxer

19Flash56 said:

I wish to invest £20,000 in total.
I want to withdraw the interest ONLY at the end of each tax year, but still keep £20,000 invested for the following tax year. 

Is this possible to do with a Cash ISA, or if not, which ISA type should I be looking at, just to have the benefit from interest each year

Many thanks for your help!!

Do you actually need the interest as income ? If not, it's better to leave the interest in the ISA to allow the amount shielded from tax to grow. £20k is just a limit on the amount you can pay into an ISA (or ISAs) each tax year - it isn't a limit on the amount you can keep in an ISA and interest earned within an ISA doesn't count towards the £20k ISA limit.

If you do need the interest paid out annually as income, then you'll need to choose an ISA that has this as an option, as not all do. This is likely to involve reading the T&C's / Summary Boxes for any accounts you're interested in.

The reason you need to make sure that having interest paid out automatically is an available option from the ISA provider is that withdrawing the interest from a fixed rate cash ISA yourself would mean you'd have to pay a penalty for doing so, which you'd want to avoid. The only exception to this would be if the ISA matures into an easy access or 'maturity' ISA, in which case you would be able to withdraw without penalty.

Albermarle

There is a sub forum, just about ISAs, so worth a read through.
ISAs & tax-free savings — MoneySavingExpert Forum

Ch1ll1Phlakes

19Flash56 said:

Hello all
I am completely new to the world of ISA 
I have read the Descriptions on each ISA type on MSE website, but still a bit confused
I have recently had a bond mature and wish to protect the money from tax by investing in a cash ISA

I wish to invest £20,000 in total.
I want to withdraw the interest ONLY at the end of each tax year, but still keep £20,000 invested for the following tax year. 

Is this possible to do with a Cash ISA, or if not, which ISA type should I be looking at, just to have the benefit from interest each year

Many thanks for your help!!

Can I ask why you want to withdraw the interest.

If your looking income from your savings that's fine but just incase you didn't realise if interest is paid into the ISA, it stays within the ISA wrapper, it's not taxable and doesn't effect your yearly ISA limit.

On the question you ask, a Cash ISA should be fine for this but you would need to check that the provider you are going with will pay the interest out of the ISA or you choose an ISA which allows withdrawals.

Have a look at moneyfactscompare for the accounts with the best interest rate. See here Best Fixed Rate Cash ISAs | Up to 4.27% AER or Compare Easy Access ISAs | Best rate currently 4.53% AER. For example, UBL UKHL Active Savings - 1 Year Fixed Rate Cash ISA is the best one year fix by interest which specifies that interest MUST be paid away from the ISA. Or a 2 is Vida Savings1 Year Fixed Rate ISA which also allows interest to be paid away but also allows for monthly interest.

FrugaiMacDugal

Just to add a bit more confusion, incase you thought you had to take interest yearly to avoid going over the £20k,  some ISAs allow you to take the interest monthly.

friolento

FrugaiMacDugal said:

Just to add a bit more confusion, incase you thought you had to take interest yearly to avoid going over the £20k,  some ISAs allow you to take the interest monthly.

The interest payment frequency, or interest itself, has nothing to do with the £20k limit. 

All the £20k is about is the maximum amount of new money you an contribute each tax year. Your total ISA balance can be unlimited. 

You can also have multiple ISAs, and transfer an ISA to another one.

ISA legislation can be changed by Parliament so you should keep an eye on the annual budget announcements.

Eco_Miser

Ch1ll1Phlakes said:

On the question you ask, a Cash ISA should be fine for this but you would need to check that the provider you are going with will pay the interest out of the ISA or you choose an ISA which allows withdrawals.

ALL ISAs allow withdrawals, it's part of the legislation.

What you need is one that allows penalty-free withdrawals.

jimjames

Eco_Miser said:

Ch1ll1Phlakes said:

On the question you ask, a Cash ISA should be fine for this but you would need to check that the provider you are going with will pay the interest out of the ISA or you choose an ISA which allows withdrawals.

ALL ISAs allow withdrawals, it's part of the legislation.

What you need is one that allows penalty-free withdrawals.

Or even better Flexible withdrawals