Does anyone understand ISA's?

[kennysarmy]

Quick question.

 

I understand the max. allowance per year is £20k.

 

But can I open a two year fixed ISA before April and invest £20k (current tax year) and then open a 1 year fixed ISA in April and invest another £20k?

 

I'd have concurrently more than 20k invested tax free but I'd only have opened one in each year so I'm guessing that's OK?

[andy_b]

Your ISA allowance is reset on 6th April. So in an ideal world you'd invest the maximum now and then have another £20,000 allowance in a months time.

[5tu]

Quick question.

 

I understand the max. allowance per year is £20k.

 

But can I open a two year fixed ISA before April and invest £20k (current tax year) and then open a 1 year fixed ISA in April and invest another £20k?

 

I'd have concurrently more than 20k invested tax free but I'd only have opened one in each year so I'm guessing that's OK?

 

Yes you can as the accounts are being opened in separate tax years. The tax year runs from 6 April to 5 April.

 

Reference: https://www.gov.uk/individual-savings-accounts/how-isas-work

Edited March 6, 2024 by gybe78

[Wave9_Lee]

Your allowance is 20k per tax year currently, so you can rollup overtime to a large amount. So if you haven't already, you can invest £20k before 5th April and another after the 6th of April (that would be your limit until April 2025) If you're lucky enough to get to £85k in one ISA you might want to add a different ISA for future funds to make sure your money is protected by the fscs. Check that the ISA you choose doesn't penalise transfers, as once the fixed rate ends, the new rate may be unattractive..

 

https://www.moneysavingexpert.com/savings/isa-guide-savings-without-tax/

[jmak]

And now you invest an extra £5k per year in British funds - add long as you've got a spare £25k.

 

The above posts mention what you can invest. The other side of it - and the purpose - is that all income from the ISA is tax exempt. That's why it's more attractive than a normal savings account. The downside is that you're more restricted on taking your money out. You can move money from one ISA to another without affecting your annual allowance (but you have to follow the proper process). If you take money out of the ISA wrapper, you can't reinvest it in the same financial year if you've reached the annual limit.

[andy_b]

Also worth noting that the £20k is shared across all ISA's, so you can't invest £15k in a Cash ISA and £15k in a stocks and shares ISA for example - in a single Tax year.

[sigma]

And now you invest an extra £5k per year in British funds - add long as you've got a spare £25k.

 

The above posts mention what you can invest. The other side of it - and the purpose - is that all income from the ISA is tax exempt. That's why it's more attractive than a normal savings account. The downside is that you're more restricted on taking your money out. You can move money from one ISA to another without affecting your annual allowance (but you have to follow the proper process). If you take money out of the ISA wrapper, you can't reinvest it in the same financial year if you've reached the annual limit.

 

If you have Stocks and Shares in an ISA the dividends are tax free and there is no Capital Gains Tax to play when you sell them.

[PotNoodleTech]

I'd be doing a stocks and shares ISA if it was me as not only to you get the regular dividends once twice or 4 times a year depending on the companies, you stand a chance of benefiting from a pure increase in price (value of your investment) over the years so it' a double win if you pick good companies and get a bit lucky. I did a test last year with just £1k and made approx £75 in dividends and sold the stocks for +20% so way more than the 4% interest I may have got from a bank.

 

You can also apparently do up to something like £40-50k in premium bonds which is also tax fee I believe this is as well as any ISAs you have.

Edited March 7, 2024 by PotNoodleTech

[kennysarmy]

Your allowance is 20k per tax year currently, so you can rollup overtime to a large amount. So if you haven't already, you can invest £20k before 5th April and another after the 6th of April (that would be your limit until April 2025) If you're lucky enough to get to £85k in one ISA you might want to add a different ISA for future funds to make sure your money is protected by the fscs. Check that the ISA you choose doesn't penalise transfers, as once the fixed rate ends, the new rate may be unattractive..

 

https://www.moneysavingexpert.com/savings/isa-guide-savings-without-tax/

 

 

 

Thanks Lee,

 

Does a transfer count as a "new investment" if the rate at the end of say a fixed 1-year is rubbish ?

[andy_b]

Thanks Lee,

 

Does a transfer count as a "new investment" if the rate at the end of say a fixed 1-year is rubbish ?

 

As long as use the proper ISA transfer process you can move as much as you want.

 

The allowance only counts for new monies added.

[foofighterjim]

Somebody please correct me if I am wrong but I believe you can have a Cash ISA and a Stocks & Shares ISA in the same tax year but you are limited to the 20k allowance over the two i.e. you could put 15k into a Cash ISA and 5k into a Stocks & Shares ISA in the same year.

[dmj]

On the point about the FSCS protection limit of £85k - it's moot if you have stocks and shares ISA because the stocks are not held by the provider, so if the provider goes bankrupt the shares are still protected.

 

WRT the British ISA; I'd only do this as a last resort. If you live and work in UK you are already overexposed to the UK economy so investing in it is a very bad decision. Global ETFs are far less risky from an exposure point of view.

 

LISA is a good bet if you don't already own a home and are under 40

 

Stocks and shares pensions (SIPP) is what I'm putting my money into. The Government pays in an extra 20% automatically.

[andy_b]

Somebody please correct me if I am wrong but I believe you can have a Cash ISA and a Stocks & Shares ISA in the same tax year but you are limited to the 20k allowance over the two i.e. you could put 15k into a Cash ISA and 5k into a Stocks & Shares ISA in the same year.

 

Correct, you can invest in both, but are limited to an overall 20k allowance.

[andy_b]

Also worth noting if you are not taking advantage of ISA's / other Tax free savings, your Personal Savings Allowance isn't that difficult to reach if you are getting 5% interest:

 

 

Income Tax band Personal Savings Allowance

Basic rate £1,000

Higher rate £500

Additional rate £0

[kennysarmy]

I was looking at a Halifax Fixed Rate Cash ISA (already bank with them)

 

They state "Open with £500 or more. Then save what you like within the first 60 days as long as it's within the ISA allowance"

 

I'm unsure if this would then prevent me from transferring in from a maturing fixed rate ISA (also with Halifax) it if does not mature within the 60 days.

[jmak]

That'll be at least partly down to their terms and conditions. The only way to be certain is contact them (and hope you come across someone who understands what you're asking).