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NilReturns

athom85 wrote: »

Ok, so i know that I'm allowed 1 isa a year.
I opened an isa last tax year (June 2010), into which i have a standing order that deposited £200 a month into it. This standing order has carried on to this day, with money being payed into the Isa account every month since i opened it.
My questions is, does this count as this years isa, since i've constantly being paying into it, or because it was opened last tax year, can I still open a new one now?

Normally if you continue payments past the end of the old tax year and into the new tax year, it will automatically roll over the ISA agreement into the new year (and therefore count as your new ISA).

kitc

I'm still a bit confused about how much tax free interest I can earn in a year on a cash ISA.
If I've invested the full £5340 for 2011/12 and then I invest the full £5640 for 2012/13, at the end of the second year is the interest on the full sum (£10980) tax free or just the second investment of £5640?

DragonQ

The interest on all of it will be tax-free.

Think of it like a box with two compartments - a "this tax year" compartment and a "previous tax years" compartment. This box is a "tax-free" box and everything in it will earn you tax-free interest. There's a hole in the "this tax year" compartment so you can drop new money in the current tax year, but the compartment is small so there's a limit to how much you can fit, and you can't separate that money.

At the end of the tax year, everything in the "this tax year" compartment falls into the "previous tax years" compartment and the "this tax year" compartment grows a bit.

You can then rearrange the money in the "previous tax years" compartment as you wish but there's no hole for you to add new money to it.

Probably a bad analogy but best I can think of right now.

aliasojo

DragonQ wrote: »

Probably a bad analogy but best I can think of right now.

Not at all, I thought it was very helpful.

kitc

So to expand DragonQ's analogy anything in the "previous tax years" compartment earns tax free interest year after year.

NilReturns

DragonQ wrote:

Probably a bad analogy but best I can think of right now.

aliasojo wrote: »

Not at all, I thought it was very helpful.

What about ...

Your ISA is a train, with unlimited seats & a buffet car.
Each tax year has its own railway station along the line.
However the platform on each station is only a certain size, so the number of people at each tax year is limited.
So you are limited on how many people each year can board the ISA train, but once they are on board they can feast in the buffet car and grow as much as they like.

Hummm... maybe the boxes analogy does work better:-)

Gemsie

I have money in an ISA account for the current tax year, but haven't used my full entitlement. Next year, do I just keep placing more money in that same account or do I have to start a new one up? Thanks!

aliasojo

NilReturns wrote: »

What about ...

Your ISA is a train, with unlimited seats & a buffet car.
Each tax year has its own railway station along the line.
However the platform on each station is only a certain size, so the number of people at each tax year is limited.
So you are limited on how many people each year can board the ISA train, but once they are on board they can feast in the buffet car and grow as much as they like.

Hummm... maybe the boxes analogy does work better:-)

I'd rather a train with each carriage being a tax year.

Each carriage has 5640 seats and once that many people get on that carriage, it's full and the doors will not let any more people on but they will allow people to get off. If people get off, they are not allowed to get back on again.

Anyone else at the station will have to wait until the next year to get on the next carriage.

Methinks we're playing a bit too much now. :rotfl:

ianwragg

I put £5340 into a Northern Rock ISA in tax year ending 2012. It has produced about £50 in interest since it was in there. I have left this in the ISA and am now about to put in £5640 for tax year ending 2013. So this would mean I have £5340 + £50 + £5640 = £11030 in the ISA on 6th April 2012. Will I get tax free interest on the whole £11030 (i.e including the accumulated interest left in from 2012, or is it only tax free on the allowed maximums per annum, i.e £5340+5640 = £10980, leaving the accumulated £50 profit from last year to gain interest but to be taxed

badger09

ianwragg wrote: »

I put £5340 into a Northern Rock ISA in tax year ending 2012. It has produced about £50 in interest since it was in there. I have left this in the ISA and am now about to put in £5640 for tax year ending 2013. So this would mean I have £5340 + £50 + £5640 = £11030 in the ISA on 6th April 2012. Will I get tax free interest on the whole £11030 (i.e including the accumulated interest left in from 2012, or is it only tax free on the allowed maximums per annum, i.e £5340+5640 = £10980, leaving the accumulated £50 profit from last year to gain interest but to be taxed

Assuming your particular Northern Rock (now Virgin Money?) ISA allows you to add to it, you can pay in up to £5640 on or after 6th April 2012. You will then start earning tax free interest on £11030 straight away :j. Interest does not form part of the amount you are allowed to subscribe (pay in ) each year.

Do check the rate of interest though. Very often, instant access ISAs include a bonus, payable for a limited time, after which the rate plummets :eek: