I notice elsewhere on Ch4 site they have a section about Cash ISAs and comment that you don't need brains to understand them. Errrr, in that case, unfortunately, it looks like I don't have a brain! :-(
I've never really looked into these before as they weren't relevant, but now I am considering putting some cash into a cash only isa, and I can't seem to find answers to some, probably basic, questions. Can someone enlighten me?
For instance, if I were to put a lump sum, say £3000, into a cash isa tomorrow (4th Feb) what happens when a new tax year starts? Do I just leave the money in the bank/building society and it continues to earn the tax free interest? Can I then, as it's a new tax year, put another £3000 into the same isa, or do I start another one? Does it mean that I then get tax free interest on £6000?
I'm probably missing something somewhere, but if anyone can help me understand this, I would be very grateful! :-/
when i took my isa out i was told u can only open one isa in any tax year - and on my type of isa I can invest up to £3000 in a year - i think if you open one one year and one the next you can still only invest 3K between them, I can withdraw money at any time but can only put the max in(no matter how much i take out) After the year i can either withdraw or keep it going, so if investing 3K - can't add any more to it in that year, after the year u can leave it there for the next year or add another 3K to it I know there are other isas that you can pay more into - but unsure of their 'rules' hope this helps
For instance, if I were to put a lump sum, say £3000, into a cash isa tomorrow (4th Feb) what happens when a new tax year starts? Do I just leave the money in the bank/building society and it continues to earn the tax free interest? Can I then, as it's a new tax year, put another £3000 into the same isa, or do I start another one? Does it mean that I then get tax free interest on £6000? jp51
You can invest £3,000 in each tax year. So you could put in upto £3,000 on April 5 2005 and then another £3,000 on April 6 2005 (for example). The first £3,000 just carries on earning tax-free interest.
I think you can put each year's £3,000 in whichever cash ISA you like - the same one as last year's or a different one. The advantage of putting it all in the same one is that there are usually better rates of interest on large balances.
You can also move the money from one Cash ISA to another without losing the tax-free status - if you see one with a better rate.
The main disadvantage as Sunny says is that you can't "replenish" any money you withdraw (if you've invested your £3,000 for the year). But you can withdraw the interest without losing the tax free status.
as far as i know, i dont know much about isa's as i dont have one, but you can only have 1 ISA and you can pay in £3,000 each year for the first 3 then £1,000 every other year i think its £10,000 tax free savings or something like that
You are referring to your Cash ISA allowance, which is a maximum of £3K a year. The Cash ISA can be taken in the form of a Mini Cash ISA for up to £3K per tax year (as the rules stand, and I think has been extended in last budget until 2010), this also allows those who are inclined to open a Mini Stocks and Shares ISA for up to £3K and an Insurance ISA for up to £1K (if you can find one – not very popular) in the current tax year – these 3 MINI elements can be taken out with different providers(hence total ISA allowance is £7K per tax year (as rules stand…).
Alternatively, you may elect to have a Maxi ISA, the limit is £7K and with a Maxi the CURRENT tax year’s Maxi must be held with just one provider (one may not have a Maxi and any Mini in the same tax year). How the Maxi Currently works: The whole £7K can be put into stocks and shares, or up to a maximum of £3K of the £7K can be put into Cash (you can’t get more than £3K into a Cash ISA) and even up to a Maximum of £1K of the £7K can go into an insurance element. You may treat the Maxi ISA in the same way as a Mini Cash ISA by simply investing into the Cash Component of the Maxi ISA, where your capital is secure in the same way.
Next tax year, 2005-06, the insurance element is discontinued and the Mini Stocks and Shares allowance goes up to £4K.
Regarding the cash ISA: Your provider may pay interest on the ISA in several ways, as outlined in their terms and conditions. Generally, the interest for the tax year will be added on the last day of the tax year (5th April), and the ISA is ‘open ended’ (as the rules stand), from the 6th April in the next tax year you will start earning interest on the new balance, including last year’s interest (it is compounded). You may pay take the next years £3K cash allowance with the same provider and you will start earning interest on the £3K + the interest from previous year + new £3K.
Providers have scope to tier their interest rates if they wish depending on how much you have in the account, how many withdrawals, etc. They may also impose restrictions on the number of withdraws allowed or they may choose to operate a Cash ISA where you must leave your money in the account for a set period – the terms and conditions can vary by large degrees.
Transfers: The transfer takes part between the providers, the provider managing the ISA is changed, the ISA is not withdrawn as such and therefore tax free status is maintained. The current tax year’s ISA may only be transferred in full (some providers may charge for this(!), previous tax years ISA may be transferred in part, i.e. leaving some of the balance behind, but only if both old and new provider support partial transfers (most will).
Getting back to the point, essentially; you may put up to £3K in a Cash ISA each year and keep all the interest that is earned within the fund also. Each year you may start an ISA with a new or the same provider and spread them around in this way. But you must never open more than on of the same kind of ISA or a Mini and a Maxi in the same year or the Inland Rev’ will ‘av you.
Hope that clears it up, any questions, let me know.
Payments to the ISAs operate in a sort of one-way-valve way - you may put upto the ISA limit into the ISA, but if you were to put £3K into a Cash ISA in a tax year and then take out £500, you could not replenish that £500. Also, if you don't use your allowence in the current tax year - it is lost for ever, you may not fill-up last year's ISA.
With ISAS - cash ones - you are allowed to have one ISA either a maxi or mini a year and invest up to £3000.00 per tax year in the cash module. (Mini ISAs are investements with different providers so you can have a different provider for the cash or shares element of the ISAs, and MAXI ISAs are investments with the same provider for cash and shares elements etc). If you have an ISA from last year you can then add to it the following tax year (upto the legal amount of £3000 for cash and/or £4000 for shares.
You can also transfer your existing ISA to another provider if you feel you are not getting a good rate. Just ask you provider for a transfer form, Check out if there are any penalty charges or fees though.
