Cas ISA's

[BJS]

Have been looking at the recent posts on CASH ISA's but being a wrinklie am still confused. The banks are saying use your allowance up before the end of the tax year in about a fortnight's time BUT surely there would be hardly any interest gained for that short time even if you were lucky enough to be able to put the whole years allownce in. Also if say I wanted to withdraw any interest gained this year in the next financial year how woud that affect any capital deposited afterwards. The other confusion I have is that I thought you could only put money in ONE CASH ISA during a financial YEAR though you coul have other cash ISA's from previous years, Thamks for any help BUT why can't they do things the easy way like it was

[boxtops]

It is easy, bjs, once you get your head round it. You can only have one ISA a year, so this year's allocation is £5100 (I think) - so yes you can put UP to that in one ISA before the end of the tax year. Next year (unless it goes up) you can put in the same amount again. You can have the interest either paid into the account, or to another bank account.
The thing to remember is that it's the TOTAL deposit which is £5100 - if you put that much in and withdraw some, you can't top it up again during the same year, it doesn't matter when you put it in - the max total deposit this year is £5100.

Your last sentence is correct, your ISAs from previous years just carry on, you can keep the same one and just put in the maximum amount, year after year.

[BJS]

Thanks for that boxtops but being a THICK wrinklie but if you are withdrawing money how do they decide if its the interest OR capital. Could I open another ISA next year in another bank and put next years allowance into that one keeping my existing one. Also what about what is thre (if any) to gain by opening or filling up a ISA now just before the end of the financial year.

[237SJ]

When you say you`re a wrinklie, are you a pensioner and are you a tax payer? If you`re not a tax payer there is no point in having an ISA. Yes, you deposit no more than £5100 per tax year and they tend to pay interest once a year which will bring your balance up above £5100. If the money is in an ISA it will keep it`s tax free status so that the next year you could have £10,200 earning tax fee interest and so on. That`s why you want to get the money in in the next couple of weeks.

[237SJ]

By the way, next year`s ISA limit is being increased to £5340

[CheekyChops]

It is easy.

Say you have £10,200 that you want to invest (I wish!!) then you could open an ISA on 4th April and deposit £5100 and then open another after the new tax year has started on 6th April and deposit your other £5100.

Its nothing to do with the amount of interest you could potentially earn in the two weeks that are left, its about getting all your money invested in accounts where the interest is tax-free.

You can withdraw the interest whenever you want, it doesn't affect the capital in any way whatsoever, you are still only allowed to deposit £5100 in that year.

You can only open one cash ISA per financial year but there is nothing to stop you opening one every year, assuming you have the money to invest!

[CheekyChops]

You and the bank will know how much you have deposited into your ISA over the year and how much interest has been paid on that amount. If you had paid in £3000 and been paid £30 interest, any withdrawals up to £30 would come out of the interest and any over that would come out of your capital.

You can open an ISA this tax year with one bank and put the £5100 in and then open another in April with a different bank and put another £5100 in and keep both accounts.

Opening an ISA now before the end of the tax year means that you would be getting your interest tax free and you could stick another sum in another ISA in a few weeks time and get that tax free too.

[dzug2]

What you put in is capital. What they put in is interest.

Yes to opening an ISA now and another one next year

Opening one now doesn't give you much benefit this FY - but it establishes the tax free status of the investment for future years. You will keep getting tax free interest on it year on year for as long as you keep it. And you will also keep getting tax free interest on the new one you open next year,.

[New Judge]

Yes, dzug is quite right and has raised an important point which you may be missing. Although you will only get a few days’ interest between now and 5th April if you open this year’s ISA shortly, the interest will keep accumulating next year (and forevermore until you withdraw the capital). However, if you do not use your ISA allowance by 5th April it is lost forever. You cannot carry over the allowance and use it next year.

One other important point. Ordinarily ISAs are usually variable rate and those that allow you instant access to your cash often pay pathetic interest rates (even by today’s derisory standards). Some hook you in with a “bonus” percentage for, say, 12 months. This bonus will cease after a year and unless you do anything about it your cash will languish in a poorly paying account. You can transfer your ISA to another provider paying better interest when this happens.

Best of all is to tie up your money in a fixed rate ISA. This pays a guaranteed rate for a set period though usually you have to forfeit some interest if you want to withdraw your cash before the fixed term is up. Only do this if you are sure you will not need access to your cash for the set period. Also, I would not tie up your money for too long as I suspect interest rates are likely to rise in the not too distant. (When I do my new ISA in April I’m looking at 2 years maximum).