ISAs - Increasing your annual tax-free savings allowance

Aegis

I believe the offer has been withdrawn. Looking over the website, I don't see the ability to get the 10% account any more, though it was certainly available back in April.

isasmurf

mball2008 wrote: »

An example: A person has opened an ISA and deposited £3,600, instantly using up their annual allowance. They are receiving a rate of 4.5% (Gross AER), with, for this example, interest paid annually. At the end of the year, they will receive £162 of interest, giving them a total of £3,762. However, they have an additional £1,000. If they were to deposit this into a second account with 0% interest, the ISA provider could then increase the interest in the ISA to 5.75% (Gross). This would give the person interest of £207 on their £3,600, which would be the equivalent of them earning the tax-free rate of 4.5% (Gross) on £4,600.Once the new tax year arrived, the bank would automatically transfer the money in the second account to the ISA, and adjust the interest rate accordingly.

This is strictly against ISA rules. Connected accounts are not allowed.

From the ISA manage guidance notes:

Where at any time, a cash ISA is connected with another savings account it will cease to be a qualifying investment and where appropriate, income tax at the lower rate should be deducted from any interest paid or credited to the account from that date.

...where an ISA manager offers a cash ISA paying interest at (x + 5)% on condition that the investor invests £10,000 in a deposit account paying interest at (x - 5)% the ‘connected accounts’ rule would be applied

roddydogs

isasmurf wrote: »

This is strictly against ISA rules. Connected accounts are not allowed.

From the ISA manage guidance notes:

so how are they getting away with it?

Aegis

roddydogs wrote: »

so how are they getting away with it?

Because they're using linked accounts as a criterion for eligibility, not for increasing the rates already available.