A Basic ISA Guide

BoomAM · 25 Mar 2008 at 14:34

Ive been meaning to get an ISA for quite some time now. But i never get around to it.
Some questions though:
-- What happens when i fill up the ISA? Do i have to open another ISA to pay more in tax free? Or can ISAs be gotten that dont have a limit, or higher limits?

-- How is it payed in/managed? I take it that the bank its with treats it as a normal account, so can be accessed and managed online? And i take it that an account number/sort code can be used to pay into it from other bank accounts?

-- How would a joint ISA work? Same as a single but opened in a dual name?

Thanks.

Spike560 · 25 Mar 2008 at 14:37

Mikoyan said:
I have literally just opened one about 30 minutes ago.......can I deposit £3600 into it now and get the return

Or do I have to wait till next year???

Thanks

Depends on how the ISA is structured, most mature on the 4th of April but some offer monthly interest payments.

Assuming yours matures on the 4th of April, you will get 11 days of interest at whatever rate you got...

I.E. at 5% putting in the maximum of £3,000 for this tax year (only goes up to £3,600 NEXT tax year). The interest gain will be:

£3,000 * 0.05 * ( 11 / 365) = £4.52

But if you invest the £3,000 before the 4th of April, you can then invest a further £3,600 on the 5th of April

BoomAM said:
-- What happens when i fill up the ISA? Do i have to open another ISA to pay more in tax free? Or can ISAs be gotten that dont have a limit, or higher limits?

-- How is it payed in/managed? I take it that the bank its with treats it as a normal account, so can be accessed and managed online? And i take it that an account number/sort code can be used to pay into it from other bank accounts?

You can only invest the set limit every year ONLY. You may invest £3,000 this tax year and a further £3,600 next tax year. so in a few months time you could have a maximum of £6,600 invested in an ISA. So each year the possible amount you have in an ISA will be larger but the limit remains fixed for the amount you can invest each year.

Mine is shown online and can be openned/managed online but there are restrictions on the management such as withdrawals which are specific to each ISA

PhilthyPhil · 25 Mar 2008 at 14:42

|Ric| said:
I'm pretty certain you can have two mini-ISAs on the go, the only restriction is you can't open more than one in a tax year. This I am more certain on then the rules about maxi ISAs but I'm happy to concede I could be wrong.

Sorry that was not very clear. I meant you can't put your years £3000 allowance into two £1500 ISAs with different providers. I think this is correct...?

booyaka · 25 Mar 2008 at 14:42

BoomAM said:
Ive been meaning to get an ISA for quite some time now. But i never get around to it.
Some questions though:
-- What happens when i fill up the ISA? Do i have to open another ISA to pay more in tax free? Or can ISAs be gotten that dont have a limit, or higher limits?

-- How is it payed in/managed? I take it that the bank its with treats it as a normal account, so can be accessed and managed online? And i take it that an account number/sort code can be used to pay into it from other bank accounts?

-- How would a joint ISA work? Same as a single but opened in a dual name?

Thanks.

Once your limits are reached for the tax year for that ISA - that's it - no more can be added. (currently a combined total of 7k)

Normally Direct debit is the best way to do it but generally most will take cheques etc as top ups or bank transfer etc.

No such thing as joint ISA's - they are single named products only so a couple have £7k each (current tax rules) therefore 14k max investment for them in a single year but they are in seperate names.

BoomAM · 25 Mar 2008 at 14:46

Spike560 said:
But if you invest the £3,000 before the 4th of April, you can then invest a further £3,600 on the 5th of April

You can only invest the set limit every year ONLY. You may invest £3,000 this tax year and a further £3,600 next tax year. so in a few months time you could have a maximum of £6,600 invested in an ISA. So each year the possible amount you have in an ISA will be larger but the limit remains fixed for the amount you can invest each year.

Ah. So there is no actual long term limit to what can be payed in? Just an yearly limit of £3000.
So in theory, in 10 years, i could pay in £30,000?

booyaka · 25 Mar 2008 at 14:46

PhilthyPhil said:
Sorry that was not very clear. I meant you can't put your years £3000 allowance into two £1500 ISAs with different providers. I think this is correct...?

only able to do this IF you are using the cash isa for £1500 and a stocks and shares isa for £1500.

If you are talking about the cash ISA then NO - you can only have 1 cash ISA with a single provider in a single tax year. So if you want to maximise your cash isa (i.e £3k ) then it must be with a single provider.

Or you could give £1500 to your other half and they could uses a different provider.

booyaka · 25 Mar 2008 at 14:48

BoomAM said:
Ah. So there is no actual long term limit to what can be payed in? Just an yearly limit of £3000.
So in theory, in 10 years, i could pay in £30,000?

correct assuming rules stay as they are but they are changing next year and you will be allowed to pay in up to £3600 a year into a cash isa

Spike560 · 25 Mar 2008 at 14:48

BoomAM said:
Ah. So there is no actual long term limit to what can be payed in? Just an yearly limit of £3000.
So in theory, in 10 years, i could pay in £30,000?

Yes that is correct (although the yearly limit is increasing to £3,600)

lozza23_uk · 25 Mar 2008 at 14:50

all good info.

the one thing that has always confussed me, is that you can only INVEST the set limit per year...but any previous ISA investment is still tax free on the interest?

and then I could have multiple ISA's with multiple providers, setup in different fiscal years, but only be able to pay into one of them....or even open a new one if I so chose every year.

is that correct?

BoomAM · 25 Mar 2008 at 14:51

So basically, to answer my questions:
- No overall limit, just a yearly one.
- Can be payed in with direct debit.

Can it be managed online if i take it out with my current bank?
Are all ISA rates, regardless of bank, the same?

lozza23_uk · 25 Mar 2008 at 14:54

BoomAM said:
So basically, to answer my questions:
- No overall limit, just a yearly one.
- Can be payed in with direct debit.

Can it be managed online if i take it out with my current bank?
Are all ISA rates, regardless of bank, the same?

they all vary....a lot!
Depending on your bank, I am sure you can keep an eye on your ISA online.

platypus · 25 Mar 2008 at 14:59

Mikoyan said:
I have literally just opened one about 30 minutes ago.......can I deposit £3600 into it now and get the return

Or do I have to wait till next year???

Thanks

Until the 5th of April you can put £3,000. From April the 6th, you can invest in the new tax year a total of £3,600. So, if you have it - you can in theory put in £6,600 in the space of 2 days, but in reality it is over two different tax years.

You won't get a years interest on the £3,000 if you were to invest it now though.

booyaka · 25 Mar 2008 at 15:01

lozza23_uk said:
all good info.

the one thing that has always confussed me, is that you can only INVEST the set limit per year...but any previous ISA investment is still tax free on the interest?

and then I could have multiple ISA's with multiple providers, setup in different fiscal years, but only be able to pay into one of them....or even open a new one if I so chose every year.

is that correct?

yes - previous years unused amounts etc can NOT be carried forward to current years.

booyaka · 25 Mar 2008 at 15:02

BoomAM said:
So basically, to answer my questions:
- No overall limit, just a yearly one.
- Can be payed in with direct debit.

Can it be managed online if i take it out with my current bank?
Are all ISA rates, regardless of bank, the same?

no - all providers of Cash ISA offer different rates as it's basically just a bank account with a tax free wrapper around it.

platypus · 25 Mar 2008 at 15:05

BoomAM said:
So basically, to answer my questions:
- No overall limit, just a yearly one.
- Can be payed in with direct debit.

Can it be managed online if i take it out with my current bank?
Are all ISA rates, regardless of bank, the same?

Depends entirely on your bank.

I can manage my ISA online. ISA rates vary everywhere, just like any financial product. Look around for the best.

Just beware: Some offer a great introductory rate for a year, then for the next 12 months you get close to the base rate of interest - and some nasty penalties if you move.

However, if you shop around you can usually find great deals if you move your ISA once every 2 years or so.

platypus · 25 Mar 2008 at 15:06

PhilthyPhil said:
Sorry that was not very clear. I meant you can't put your years £3000 allowance into two £1500 ISAs with different providers. I think this is correct...?

Correct.

lozza23_uk · 25 Mar 2008 at 15:11

booyaka said:
yes - previous years unused amounts etc can NOT be carried forward to current years.

i was more referring to clarify the tax free savings being split across different accounts.

I understand the max in per year being linked to a single provider. but lets example'ify (fry???

) it.

year 1. input 3k into a cash isa with bank x
year 2. input 3k into a cash isa with bank y
year 3. input 3k into a cash isa with bank z

your interest earned with bank x and y will never be liable to tax? or does it become liable at the time you open a NEW isa, albeit a new tax year.

in theory you could open a new one every year (spread the love/eggs in one basket). not put any more into them. just sit on them and accrew interest.

is this correct?

platypus · 25 Mar 2008 at 15:12

lozza23_uk said:
i was more referring to clarify the tax free savings being split across different accounts.

I understand the max in per year being linked to a single provider. but lets example'ify (fry??? ) it.

year 1. input 3k into a cash isa with bank x
year 2. input 3k into a cash isa with bank y
year 3. input 3k into a cash isa with bank z

your interest earned with bank x and y will never be liable to tax? or does it become liable at the time you open a NEW isa, albeit a new tax year.

in theory you could open a new one every year (spread the love/eggs in one basket). not put any more into them. just sit on them and accrew interest.

is this correct?

In theory yes, but given the nature of compound interest, you would be losing money. Why would you do this?

lozza23_uk · 25 Mar 2008 at 15:19

platypus said:
In theory yes, but given the nature of compound interest, you would be losing money. Why would you do this?

well i actually got duped into opening a new account with portman, i went in to top up my isa last year (i never withdraw) and they suggested a notice account.

well of course i thought this was great due to the added interest, so off they went and put my 3k into a notice isa, but didnt transfer the old one...just opened a new one (staff commission bonus I assume) so now I have 2 x isa's with portman.

these accounts are now owned by nationwide, and i wont know what is happening until october as to interest rates and agreements etc.

it will all come out in the wash I am sure. going to pump it again in April (just topped it up for this tax year) then review my situation again.

platypus · 25 Mar 2008 at 15:22

lozza23_uk said:
well i actually got duped into opening a new account with portman, i went in to top up my isa last year (i never withdraw) and they suggested a notice account.

well of course i thought this was great due to the added interest, so off they went and put my 3k into a notice isa, but didnt transfer the old one...just opened a new one (staff commission bonus I assume) so now I have 2 x isa's with portman.

these accounts are now owned by nationwide, and i wont know what is happening until october as to interest rates and agreements etc.

it will all come out in the wash I am sure. going to pump it again in April (just topped it up for this tax year) then review my situation again.

Hmm, well if you can prove you were duped you could probably take your case to the financial obudsman.

However, to try and consolidate your seperate ISAs, I know my ISA allows a transfer in, so perhaps you could transfer one into the other thereby combining the two? Obviously without going over your limit.

You might find if its possible to do the above that it actually means you cannot then pay into the ISA for that tax year, but you would however have overcome the problem of having seperate ISAs. Worth looking into.