Tax on interest in an ISA??

Mikeyorks

peawack wrote: »

Am I missing something here ?

Yes ..... don't think anyone was suggesting 'it goes back again' .... otherwise, as you say, that's the equivalent of further subscription payments. The suggestion is to the effect the interest should be credited direct to the ISA (which is the general norm) .. that way it attracts the benefit of tax free compounding

Mikeyorks

Rtype wrote: »

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!?!?

In which case what did you see as the benefit of an ISA? The whole rationale is that the interest is tax free?

Lokolo

Mikeyorks wrote: »

In which case what did you see as the benefit of an ISA? The whole rationale is that the interest is tax free?

No. He thought that the interest would take his ISA over the limit of £3600 and therefore make the interest taxable.

Rtype

Mikeyorks wrote: »

Yes ..... don't think anyone was suggesting 'it goes back again' .... otherwise, as you say, that's the equivalent of further subscription payments. The suggestion is to the effect the interest should be credited direct to the ISA (which is the general norm) .. that way it attracts the benefit of tax free compounding

Excellent, thats what i was trying to find out (obviously not making sense).
I will phone icesave and get them to put all further interest payments into my isa!

Cheers people!

Quasar

I have had an Isa for 7 years now. I put the maximum of £3000 in it every year, and the interest accrued goes back into it but no extra tax is paid and it does not count as part as the £3000 allowance.

This is the whole point of the ISA, that one's savings increase dramatically as the interest increases all the time whilst allowing you to put in £3000 each year and not pay tax on any interest that is ploughed back in.

YorkshireBoy

Lokolo wrote: »

I think the above people didn't read the ops post.

I did, but I read (as it's turned out, incorrectly) that the OP was talking about having the interest paid to the ISA itself...not paying it back in once it had left the ISA wrapper, which obviously would count towards the annual subscription.

The bit that threw me was probably the last sentence...

"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."


Apologies OP.

Lokolo

YorkshireBoy wrote: »

I did, but I read (as it's turned out, incorrectly) that the OP was talking about having the interest paid to the ISA itself...not paying it back in once it had left the ISA wrapper, which obviously would count towards the annual subscription.

Apologies OP.

Nevermind eh, least its all sorted

peawack

Mikeyorks wrote: »

Yes ..... don't think anyone was suggesting 'it goes back again' .... otherwise, as you say, that's the equivalent of further subscription payments. The suggestion is to the effect the interest should be credited direct to the ISA (which is the general norm) .. that way it attracts the benefit of tax free compounding

The OP states;
'My question is, if the interest was paid straight back int the ISA, would I pay tax on the amount that goes over the threshold..'
I am assuming that if it being 'paid straight back', it must have gone out. What then, was the point I missed ?

Mikeyorks

Interpretation?

I simply read that (separate para) as indicating he would change to having the interest credited direct to the ISA. His final sentence adds a bit of weight to that interpretation?;) And, clearly ..... so it didn't enter consideration .... you can't subscribe £3600 and also add back interest from an external source.