ISA newbie

reedi

OK Im a little confused.

Ive been reading Martins article about Cash ISAs and as a Barclays customer Im considering going with them.

Now Im self employed so would rather have access to the ISA money, but dont want to lose the tax free benefits when withdrawing money.

Im confused over this...

In the Cash ISA article it says "Money may be withdrawn at any time without losing tax benefits."

and yet in the Transfering your Cash ISA article it says the golden rule of Cash ISA's is....

"Never, ever, ever, ever withdraw money from a cash ISA!
You'll immediately lose all the tax benefits."

Have I read that right and am I advised to go for the Barclays one before the deadline ends?, I think I can invest some good money but like I said, wouldnt mind the option to access it just in case I need it.

Thanks

Lokolo

You are extremely unlikely to get an application open for the 07/08 open before Sunday. A lot of people on here have already been trying and can't because they have been refusing them/making them make an appointment etc.

You can always open one for the 08/09 year from Sunday though.

Um basically it depends what you withdraw the money for, if its to pay off large debts then its clearly worth it, but if you take it out and stick it into a normal svaings account and start paying tax on it then you loooooose.

reedi

Thanks Lokolo

Thinking about it does Martin mean that when you transfer you shouldnt withdraw the money first before putting it in a new one otherwise you'd lose your tax benefits but instead fill in a form for the new people to transfer the funds for you, and so keeping the tax benefits.

Otherwise it's still a contridiction, withdrawing is withdrawing at the end of the day isnt it?, surely they cant tell where you're withdrawing the money to?

Barclays cant refuse me surely, it says current customers can apply online, only stupid thing is that I've forgotten the login info...doh.

What's the major loss (if any) if I miss this years deadline seeings as a new one starts next week?...should I just wait anyway?

Lokolo

Ok, what he means is withdraw. The terms withdraw and transfer have very different meanings especially on this site.

Transfering you don't do anything except fill in a form. Withdrawing you actually take the money out yourself. If you transfer the money to a different ISA you don't lose tax benefits as you don't pay tax on the ISA. However, if you withdraw the money, then realise you don't need it, and can't put it in an ISA, you then start losing out on the tax benefits are you will pay tax on those savings.

Barclays - now the only thing you would lose out on is £3000 worth of ISA. It really depends how much money you have at the moment.

From now until Sat you can put £3000 in an ISA. Then from April 6th 08 to April 7th 09 you can out £3600 in. If you have £6600 then fine, open one now, then one next week and you have £6600 worth of ISAs.

However if you don't it doesn't matter, just fill up ISA as much as possible each year.

And if you are an existing customer, find those login details, you can apply. I presumed you weren't a customer.

KiKi

Hi Reedi

Yes - what you put in your first para is correct. You MUST ask your new ISA account owner to transfer your old ISA subscriptions for you.

The issue isn't where you're withdrawing it to, it's the amount you have in your ISA. Think about it: you can only put £3600 'new' money into an ISA each year from 08-09. ('New' money is money that comes from *you* which hasn't been in an ISA before.)

Now let's say you have £9,000 in a Barclays ISA - £3K a year for the last three years. You take that money out *yourself* to put into a different ISA...and then find you can't. You now have £9K in your hand an can only put £3600 into an ISA for 08-09.

Had you transferred it, you could have transferred the whole £9K plus the interest you'd earned on it.


Any money that comes from you to go into an account is 'new' money, and restricted to £3600 per financial year into ONE ISA. Transfers are not treated as new money, so you can transfer money from one ISA to another with no limits.


(If you withdraw £100 from your ISA once it's open, obviously you don't get the tax-free interest on that. But that's your call. It's not the same as withdrawing the LOT after two years and then only being able to re-save half of it.)



The loss for this year's deadline is that you can put £3000 until April 5th, then ANOTHER £3600 from April 6th. So £6600 this month.

If you miss April 5th, you can only invest £3600. The difference in interest is a few hundred quid. However, you're very unlikely to make the April 5th deadline now.

HTH you.
KiKi

reedi

Ah right, think I get you now, why is nothing ever easy to understand?, they give on one hand but take on the next.

It's amazing how banks when you owe them money they charge you double figure percentage interest but when you want to make money out of them they keep it singular and stick on all kinds of clauses.

Thanks anyway, think Ill hold off cause Im more worried about rushing into it. I am a Barclays customer yes, I just dont use them much, I've transfered accounts, just havent got round to closing it yet.

cheers

KiKi

Don't worry about opening the Barclays tax-haven ISA for next year - you can access your money at any time just like a savings account. But if you don't touch it, you'll get 6.5% interest tax free. Not to be sniffed at.

Next year, you could transfer it to another ISA, or keep it in there and add to it.

Even if you do withdraw it all yourself, it's not the end of the world; it just means you can't re-save it in an ISA until next financial year.

KiKi

reedi

Ah thanks Kiki, I follow now, suppose I might aswell throw something into one....might take a while before I can buy the yaught though.

Thanks