Possible stupid ISA question!

phil7445

Last year I maxxed out a cash ISA. Then at the end of the year when the interest gets added on, it goes above the maximum tax free amount.

Does this affect the tax free rules? Should I remove any money over £3000 which (I believe) was the tax free limit. Or will all the money plus interest still be tax free?

Thanks. I hope this isn't too stupid a question!

Mikeyorks

No it doesn't affect the tax free rules. The interest doesn't form part of your allowance (£3600 from this year) .... and you just leave it to accumulate (and compound) with the capital.

phil7445

Great thanks. I intend to leave it there very long term! :-)

Mikeyorks

But sensible to watch the interest rates! Most of them decay over time .... and you need to transfer to either a better one with your existing provider .... or a better one elsewhere?
But do make sure you 'transfer' it .... don't do a withdrawal and attempt to move it otherwise you lose the tax free status. And when you do a transfer .... the interest is calculated to the transfer date and transfers along with your capital.

phil7445

Ok will do. The one I opened in the last tax year is with NS&I which at the time was the highest interest rate as recommended by Martin. I guess I could look into it.

But then I guess if I max out this years limit with the best buy, then to transfer an old one would have to be to the second best one.

Mikeyorks

phil7445 wrote: »

But then I guess if I max out this years limit with the best buy, then to transfer an old one would have to be to the second best one.

Depends if you choose (Barclays Tax Haven?) one which only accepts 'new money'? But if you choose one that accepts transfers in (and most do) .... then you can either transfer the NS&I one now .. then add the £3600 once the transfer is complete. Or add the £3600 now, if you have it, and then immediately initiate the transfer.
Keeps it all in the same 'pot' .... which isn't essential - but most people appear to prefer for practical purposes? Mine are all fixed rate ... so essentially they're all separate pots opened at different times and - to be honest - it's beginning to irritate me. Can't wait for them to mature in order I can start to consolidate them.

phil7445

Oh I see. That is a good idea to keep them all the the same bank. I will look into it properly during the week. Thanks.

phil7445

Mikeyorks wrote: »

Depends if you choose (Barclays Tax Haven?) one which only accepts 'new money'? But if you choose one that accepts transfers in (and most do) .... then you can either transfer the NS&I one now .. then add the £3600 once the transfer is complete. Or add the £3600 now, if you have it, and then immediately initiate the transfer.
Keeps it all in the same 'pot' .... which isn't essential - but most people appear to prefer for practical purposes? Mine are all fixed rate ... so essentially they're all separate pots opened at different times and - to be honest - it's beginning to irritate me. Can't wait for them to mature in order I can start to consolidate them.

I am a bit disorganised and still not done it! One more question. The Barclays one is the best rate so I assume I can take a new one with them, but as they don't do transfers can I transfer last years into A&L for example? So new with Barclays and transfer last years into A&L?

debbie42

phil7445 wrote: »

One more question. The Barclays one is the best rate so I assume I can take a new one with them, but as they don't do transfers can I transfer last years into A&L for example? So new with Barclays and transfer last years into A&L?

Yes, you can transfer old ISAs to different accounts to suit your needs, as long as the new provider accepts transfers.