Tax on interest in an ISA??

Rtype

I have last years plus this years tax allowances in a cash ISA with Icesave at the moment (£6600) with the interest being paid straight into my normal Icesave savings account.
My question is, if the interest was paid straight back into the ISA, would i pay tax on the amount that go's over the threshhold (£6600) or is it included in the ISA allowance??
Some people are saying that i would and others are saying that i won't hence why i currently have it going out if the ISA and back into my savings account.

Many Thanks in advance

tanith

No the interest is not taxed as long as it remains inside the ISA.....

YorkshireBoy

Rtype wrote: »

...would i pay tax on the amount that go's over the threshhold (£6600) or is it included in the ISA allowance??

No, and yes...in that order.

Interest added does not count towards your yearly subscription limit.

freddysmith

All interest that is accumulated within the ISA is tax free, so the following year you will also get interest on the interest aswell (compounded).

Rtype

Can i change where the interest is payed or do i have to wait until the next tax year?

Lokolo

Rtype wrote: »

Can i change where the interest is payed or do i have to wait until the next tax year?

You can change, but I don't have an ICEsave account so not sure how. But the interest won't go back into the ISA, it will just make future payments paid into it.

peawack

But I thought that once it leaves the ISA wrapper it becomes new money if it goes back again. If your allowance is already used up then the extra 'new' money is treated like any other savings. Am I missing something here ?

Lokolo

peawack wrote: »

But I thought that once it leaves the ISA wrapper it becomes new money if it goes back again. If your allowance is already used up then the extra 'new' money is treated like any other savings. Am I missing something here ?

No you are correct.

[edit]

I think the above people didn't read the ops post. But the interest that was paid into is other account cannot be put back in as he has filled his ISA up and the transferance of the interest back into the ISA would be counted as new money.

Rtype

Lokolo wrote: »

You can change, but I don't have an ICEsave account so not sure how. But the interest won't go back into the ISA, it will just make future payments paid into it.

Sure i'm being thick here but i don't understand that?
I was under the same impression as Peawack hence why i had the interest paid into my usual savings account as i thought it would be taxed!?!?

Lokolo

Rtype wrote: »

Sure i'm being thick here but i don't understand that?
I was under the same impression as Peawack hence why i had the interest paid into my usual savings account as i thought it would be taxed!?!?

Any interest paid from an ISA, into the ISA, stays tax free.

You paid your interest into a non ISA account, and therefore the interest, does not have tax free wrapper on it.

Jonbvn

peawack wrote: »

But I thought that once it leaves the ISA wrapper it becomes new money if it goes back again. If your allowance is already used up then the extra 'new' money is treated like any other savings. Am I missing something here ?

The interest already paid into another non-ISA a/c will be considered as new money. However, if the interest remains in the ISA wrapper it is not considered as new money.

Given the above, the OP cannot put the interest money already paid out back into his ISA. However, he can instruct ICESAVE to pay all future interest into the ISA a/c.