ISAs are an easy way to earn more interest on your savings, or make a profit on your investments without having to pay any tax. However, there is a limit to how much you can save or invest in an ISA, we explain.
Each year HMRC set an annual ISA allowance that specifies just how much you can pay into ISAs for the next tax year.
They generally specify a total ISA allowance, as well as confirming how much of this can be saved in a Cash ISA.
This gives you the option to invest your full allowance in an Investment ISA if you wish or up to 50% in a Cash ISA and the remainder in an Investment ISA.
ISA allowances last for 12 months and run from one tax year to another - 6th April to 5th April - as opposed to being based on the Gregorian calendar (January to December).
For the 2013/14 tax year the total annual ISA allowance was £11,520 of which £5,760 can be saved in a Cash ISA.
For the 2014/15 tax year the total annual ISA allowance was £11,880, of which £5,940 could have been saved into a Cash ISA. However, from 1 July 2014, the total amount has risen to £15,000, and there will be no limit to how much of this can go into a Cash ISA.
The annual ISA allowance is now the same for both those under 50 and those over 50.
No, ISA allowances cannot be carried over from one year to the next.
If you don't use your ISA allowance in full by the end of a tax year (5th April) you lose it, although you will start the new tax year with a new ISA allowance.
It's for this reason that you should make the most of your ISA allowance if you want to maximise the chance to protect your money from the taxman.
No, if you withdraw money from an ISA you can't pay it back in without using up more of your annual ISA allowance.
So even if you withdraw all the money from your ISAs, if you've already paid in the maximum amount you're able to this tax year, you won't be able to add a penny more.
For example if you pay £4,000 in a Cash ISA but withdraw it two months later, you will only be able to pay a further £11,000 into your Cash ISA over the rest of the tax year from July 1st.
There is no limit to the number of ISAs you can hold - it's possible to open a new Cash ISA and a new Investment ISA each tax year and keep your old ones open.
However, you can only pay into one Cash ISA and one Investment ISA each tax year.
It is possible to transfer both your current year's ISAs and previous tax years' ISAs from one provider to another to ensure that your ISA savings remain profitable. You can transfer previous tax years' ISAs individually from one account to another, or amalgamate them together.
If you exceed your annual ISA allowance by paying more than £5,940 into a Cash ISA or £11,880 into ISAs in total, any money over the limit will not qualify for tax free status. Any additional funds you wish to add from July 1st you will be able to do so up to a collective ISA value of £15,000 for the 2014/15 tax year
So while any money within the ISA allowance limit will earn interest or returns tax free, anything over will be liable for tax.
If you find that you have paid too much into an ISA you should contact the HMRC ISA Helpline to explain the problem as they will inform you of whether you need to take any action.
You can pay into one Cash ISA and one Investment ISA each tax year. If you accidentally pay into multiple Cash ISAs or multiple Investment ISAs within the same tax year then your second ISA will be invalid and not eligible for tax relief.
Rather than withdrawing the money or closing the account you should contact the HMRC ISA Helpline, explain the issue and follow their instructions.
What happens at the end of the tax year? Do you need to re-apply for an Isa to continue to get the tax free allowance or does that automatically happen?
At the end of each year you automatically get a new tax free allowance, any money you have deposited in previous years will remain tax free as long as you don't withdraw it from your ISA.
If you have money in an ISA from a previous tax year you can "transfer" it to a new account to get a better rate but you would need to do this through your ISA provider.
If I get the interest generated added directly back into the ISA account, does that count towards my tax free allowance? For example, I put in the full £5,640 in May, then every month the interest gets put straight into the ISA by the bank. Am I now over the allowance?
No that wouldn't count towards your ISA allowance, only money deposited by you counts :-)
Hello my confusion with ISAs continues any help much appreciated
firstly is a cash ISA the same as an E ISA, an easy access ISA and an instant ISA?
So last year 2011/2012 I opened an E ISA, now after April I didnt transfer it to another provider so obviously the interest dropped BUT I have withdrawn and deposited into the E ISA in this new tax year 2012/2013. Am I right in thinking that because I have made deposits/ withdrawals in this new year that I cant now (I know its a bit late ) transfer the money to a new ISA and benefit from higher interest rate?
Thats the impression I got from the bank when I enquired some time ago about transferring to a better rate. That Id have to wait until 2013/2014 because Ive had ISA "activity" this year
There are lots of different types of ISAs available on the market and Easy Access and Instant ISAs are two of these.
To move money held in an old Cash ISA to a new home without losing it's ISA protection you need to complete an ISA transfer - if you withdraw your money in Cash it will lose its ISA protection and when you deposit it in a new ISA it would count as "new money", which sounds like what's happen in you case.
However, this doesn't mean you can't transfer your Cash ISA this tax year. You can if you wish move all your money to a new Cash ISA via an ISA transfer.
You would need to move all your money in one go (to avoid having paid into two Cash ISAs in the same year) and you would need to request the transfer through your new Cash ISA provider. Don't withdraw the money in Cash yourself as you then wouldn't be able to deposit it again.
You can find a list of Cash ISAs that accept transfers here:
If you've got any other questions, just ask! :-)
Hi thanks for the reply so the money I've put in my old isa but for this current year is counted towards this years allowance then, so if I transfer all the money from my old isa (old money plus say £600 I've put in this year) how does the new isa provider know I've used 600 of this years allowance? Don't want to end up getting into trouble for putting in too much Thanks
A very good question cmfm87!
When you complete your transfer your new ISA provider will check with you existing ISA provider how much you deposited during the current tax year - so in this case £600.
This is part of the ISA transfer process that you will have to request when you apply for a new Cash ISA.
It also means that you have £5,040 of your 2012/13 ISA allowance remaining - so as long as you don't pay in more than this on top of what you're transferring you'll be fine.
Oh no just as I thought I got my head round it :s so I have an isa that pays 2.50% variable bonus after 12 months and .50% excluding bonus, this was opened in September so I'm taking it that if I transfer to another isa before then I only get the .50% which is paid in march, does that mean 2.50% is paid in September? So basically to get 3% I need to stick until my September anniversary?
If your ISA has a fixed 12 month bonus then this sounds quite probable, however to make sure you know exactly where you stand, and what interest will be paid & when I suggest you speak to your current ISA provider.
You may find that transferring your ISA to a new home during the 12 month bonus will mean you sacrifice the bonus interest you've earned to date, making moving less appealing!
The only way to be certain is to check your accounts terms and conditions carefully or to check with your ISA provider. :-)
If I manage to fill my ISA for 2012-2013 to the limit will;
1) The interest gained over the year that will be added to the account be tax free as I assume this will be paid as the ISA enters the new tax year?
2) When the new tax year starts, and I fill my ISA to the limit, will the interest I gain be from the 2013-2014 year or from all money in the account?
3) Will all money in the account at the end of 2013-2014 year be tax free?
1. Yes your interest will be paid tax-free
2. You should earn interest on the whole balance of your account
3. Yes, all the money you have within your Cash ISA will remain tax free until you withdraw it
I hope that helps :-)
It does indeed. If I was to move ISA to a better rate would this have any effect on my limit. I.e. If I move £5000 to a new ISA, would my limit be pretty much used up with that transfer?
Anyone know of the best rate going ATM for ISA?
Just looking at my ISA terms and it has the following;
''Funds from previous tax year allowances cannot be paid into this account''
Does this mean I cannot keep my 2012-2013 money in this account?
If you transfer your ISA through your bank it won't use up any of your allowance and you'll be free to pay in the full amount each year.
You can find list of ISAs that will accept transfers here: http://www.money.co.uk/savings-accounts/cash-isa-transfers.htm
& some more info on how to arrange a transfer here:http://www.money.co.uk/article/1005213-cash-isa-transfers-how-to-manage-and-maximise-your-money.htm
Just saw your second comment,
This means that you can't move any funds from previous Cash ISAs into your Coventry account. You should still be able to keep it in there as long as you like, or transfer it to another ISA if you find a better deal.
Excellent. It looks like my 3.10% is a good rate at the moment so there's no need to move.
Thanks for the advice, good site, keep up the good work.
Hello there, Sarah here
I don't have an ISA currently so I am just doing some initial research, I thought I had got my head around it however I looked on the First Direct website (having read this was voted one of the best of last year) and it says you can get 2.96% tax free AER on balances of £40,000+. I thought you could only invest and receive tax free interest of savings of £5,300 (for 2012/2013)?
Here is the website link:http://www1.firstdirect.com/1/2/savings/cash-isa#howmuch
Any info would be greatly appreciated!
The First Direct ISA you mention accepts transfers from your old Cash ISAs.
This means you could transfer money held in previous tax year's Cash ISAs to your new account and end up with a balance of over £40,000.
The annual limit of £5,300 only applies to new money you deposit in an ISA for the first time.
You can find out more about Cash ISA transfers here:http://www.money.co.uk/article/1005213-cash-isa-transfers-how-to-manage-and-maximise-your-money.htm
I hope that helps.
I put in the full £5,640 in June, but i didnt receive any interest to the ISA account. i guess i shoul get some interest paid by the bank my balance still shows £5,640. do they pay all amount interest at the end of the year or what any idea?
This will depend on the ISA you've chosen, some apply your interest at the end of each month, others will wait until the end of the year and apply it all in one go.
You're best bet is to check with your bank or building society that manages your ISA, they should be able to confirm what interest you've earned to date and when it will be paid.
I hope that helps, Martin
Hi, I have a Cash ISA that was opened just before the end of the tax year 2011/2012, the full amount got transferred over shortly after the start of the new tax year 2012/2013, I am earning interest each month but does this mean I cannot open another cash ISA this tax year?
If your balance was transferred from an existing ISA (via your ISA manager) then it will not count towards you current annual ISA allowance, leaving you free to look for another Cash ISA.
Thanks for the reply. Unfortunately not, it was transferred from a current account, I presume this means I can't?
Hi Jetsada, if you funded you Cash ISA from your current account during this tax year that will count towards this year's annual allowance.
If you're unhappy with your Cash ISA though, you can still transfer it to another, as long as you move your balance in full, you will need to do this through your ISA account manager though, rather than withdrawing the money yourself.
You can find a list of Cash ISAs that will accept a transfer here.
Can you go on saving indefinitly in a ISA .
Hi i have just been reading your fantastic article. The only question i have is about how much i can deposit into my 1 ISA in total. I have a Halifax Online Saver ISA and am almost up to my £5640 limit for the tax year 2012/2013, and i understand i cant go over this amount. But when the new tax year starts can i continue to deposit into this account? So technically in 3 years i can have £15000 in one ISA as long as i dont pay over the £5640 per year?
Yes you can continue to pay into your existing ISA when the new tax year starts but again you won't be able to pay in more than the 2013/14 Cash ISA allowance (£5,760).
So in theory you could have:
£5,640 in your account + £5,760 2013/14 allowance = £11,400
You could then again pay into the account again once the 2014/15 tax year begins.
Of course you'll need to keep an eye on your interest rate throughout and if it drops arrange to transfer your ISA to get a better deal :-)
Wonderful!!! thank you that was my only confusion whether i needed to open a new one or not when that amount was in my account :) i can see above your links for ISA transfers, thank you so much :)
Dear Martin,Pls note that I received a letter from H & M Revenue saying that I have put too much money into cash ISA account, more than I should have put in the tax year to the 5th April 2012. One cash ISA account dated 24 June 2011 : GBP 5340.Second cash ISA account dated 03/04/2012 : GBP 5340.What happened was; as far as I remember ; I was checking my account and I knew how much I should put etc. I arranged accordingly my account in that year. But that year was really really busy for that year for me and lots of things were happened. I got married etc . And I received few phone calls from my bank , the lady kept calling me and said I should go to the bank or do it on the phone and use my allowance for that year and I asked her if she is sure that I had not used all my allowance in that year and she said "NO" I had not used my all allowance. I know the lady wanted to help and did want to do her job etc. Also , I accept that it is also my responsibility to check it. But it still does not make sense for me, why they called me and asked me to go to the bank and they can clearly see what accounts I have with them and their system even should not allow them to open another account or not to put money and I went to the bank yesterday to check if this information is correct from the HM Revenue. And yes it was correct and the branch manager did not do anything and he said it was my responsibility to check my accounts and they only did their job.I do not like to receive such a letter from HM Revenue and I do not trust my bank (Natwest) any longer, and I have banking with them so many years (personal and company accounts ). I am not happy with their service. Please can you tell me what's your opinion , please ?Thank you and Kind regards
Dear Martin, I am just wondering if all the money from cash ISA from previous years will lost its tax free status as soon as I try to withdraw it... which suggests to me that I will never be able to use my savings without jeopardizing the tax-free status...so what's the point of having ISA if you can't use withdraw the money in times of needs few years down the line? I have two years worth of cash ISA and I need to use it in April 2013 towards a deposit for a house...But I am gutted if by doing so I lost all the tax savings I have made in these two years! Please clarify whether this is the case? If not, how can I withdraw the ISA money without being taxed?
Firstly I suggest that you complain to NatWest and explain to them the situation and that you feel you've been misled.
You can find out more information on how to do this here;
With regards to overpaying your ISA itself, there should be instructions enclosed with your letter from HMRC on what to do next.
All I can say is that you shouldn't try and fix the problem yourself by withdrawing and re-depositing funds. etc
If you're still unsure what to do, it might be worth giving the HMRC ISA helpline a call:
I hope that helps. Martin
Although you won't be able to re-deposit your savings in your Cash ISA you will have earnt interest at a tax free rate for the duration your savings were within your ISA.
You won't have to pay tax on the savings when you withdraw them, you just won't be entitled to earn tax-free interest any more. It's only the interest you earn on your savings which is taxed when you have your money in a standard savings account.
I hope that makes things a little clearer? If you have any other questions just ask :-)
Thanks Martin, it makes sense now!! :)
I opened a four year fixed rate cash ISA with the Halifax three years ago. I put in the maximum amount but could not add to it or withdraw. I've just tried to open a new cash ISA for this current year and have received a message in response to the application telling me I'm not eligible. Why would this be? I haven't been able to pay anything into the fixed rate ISA since I first opened it.
You should be free to open a new Cash ISA if you haven't paid into one during this tax year.
I would suggest you get in touch with Halifax to check why your application has been declined, there may be another reason unrelated to your ISA allowance.
Thanks. That's what I thought. I can think of no other reason as to why I'm not eligible. I'll give them a call.
What is the limit to my cash ISA account, over overall? Means, say for example, if I keep putting £5000 every year in my cash ISA, then is there a limit on the amount I could have in my cash ISA account in total? So in theory, is it possible to earn tax free interest on £50,000 if I put £5000 every year for 10 years in cash ISA?
In theory at least there is no upper limit to the amount you can hold in a Cash ISA.
The only limit is the amount of new money you can deposit each year - so as you suggest if you deposited £5,000 each year (assuming limits don't fall) you could have over £50,000 in your account in 10 years, all earning tax free interest.
HiI'm looking to open a new higher rate ISA to transfer my current savings into and pay in the tax-free limit amount of cash before the 5th April '13. Seen as though it is already mid-march, will I get the full interest rate advertised? Or does my money need to be in the account for a full year before I can receive interest. I haven't paid into or opened a new ISA this current tax year, so I know I'm ok to do this - I just want to find out if I will actually get the full 2.2% advertised on anything I transfer/pay in just before the deadline of 5th April.Thanks
Hi, I opened cash ISA account with my bank on 23rd April 2012, then in May 2012 I transferred it to another bank (for better interest rate), now my question is, when can I add funds to my exsisting ISA account to get tax free interest on the total amount (last years savings & interest + this year's addition I make)?
I opened an ISA earlier this month and I have paid in some cash. When the new tax year comes, will that money (if I withdraw some) come out of 2012-13 tax year or will it come out of 2013-14 tax year allowance?
If I add into the tax year 2012-13, can I withdraw without affecting tax year 2013-14?
It's only when you deposit new funds that your ISA allowance is affected, so you can withdraw the money whenever you like.
If you were to pay money back in after April, 6th 2013 it would come out of your new ISA allowance for the 2013/14 tax year.
I have £5500 saved in my ISA from the tax year 2012 - 2013. I would like to withdraw £5000 this month, but still keep my ISA and add to it throughout the year 2013 - 2014. Does this mean that I will only be able to add a further £640 to my ISA in the upcoming year... or does this not count as the amount I have saved was deposited last year? I am not sure if there is a general rule, or if it depends on the provider..
Thanks in advance for your help!
Withdrawing money from your ISA will have no effect on your ISA allowance.
Your ISA allowance is only reduced when you deposit new money into your account.
So if you withdraw £5,000 without depositing any money you would still have your full 2013/14 ISA allowance available.
Hope that helps Martin
Thanks Martin, really appreciate your help :)
I transferred some money into an old ISA my mistake in this tax year. I withdrew it straight away (I know, big mistake!!), but unfortunately it still registered. I was wanting to open a brand new ISA for this year, but think I won't be able to now? The annoying thing is, my old ISA only has 15 pence in it as the interest is such rubbish. Is there anything I can do? What happens if I close my old ISA completely? Can I still then open a new one?
Any advice gratefully received!!
Unfortunately paying into your old ISA will mean that you're subscribed to it for this tax year.
However, if the interest is terrible you can transfer your ISA to a new account, to do this you'll need to go through your ISA provider.
You can find out more here;
I hope that helps! Martin
Many thanks for your reply Martin. I am going to arrange to have the whole ISA transferred to one with a better rate. Just not the one I'd hoped to be using this year! I won't be making the same mistake again next year though. I also had totally forgotton that I had a direct debit for a very small amount paying into that ISA, and that had automatically paid in as well, so that may be something worth reminding people, to remember to check and cancel direct debits if they are thinking of opening a new ISA with a new provider!
Hi,I have about £7k in isa's from previous years and am about to open a new isa for this tax year. I know that in a few months time I will want to make a withdrawal, but was wondering if this would come from my previous tax year amounts, or the current tax year amount, therefore limiting what I will be able to deposit in future. My isa just lumps my balance together and does not differentiate between previous tax years. Hope this makes sense? Regards Dan
The easiest way to look at this is to only count how much money you pay in (you can almost ignore withdrawals).
So, if you were to pay in £1,000, you would have £4,760 of your 2013/14 ISA allowance left.
Even if you withdrew £500 for example, you would still have £4,760 left - you can't pay in and deposit again without it affecting your allowance.
If you did re-deposit the £500 you would reduce your allowance to £4,260.
The simple rule is the amount you can pay in is limited by what you've already deposited, not what you've withdrawn.
I hope that makes sense, kind regards
Hello! Just wondering if you can help? I opened up a ISA in July 2012 and have been putting my savings in but now that it's after april does this count as this year's allowance? I was hoping to transfer it when it matures in July to get a better rate and save more but will I not be allowed to put more money in, even if I move it?
If you've paid in any new money since 6th April then you will have subscribed to your existing Cash ISA this tax year.
If your interest rate is dreadful then you can still move the balance to a different Cash ISA using a ISA transfer - however as you've paid in this year you will need to transfer the balance in full.
This is to avoid being subscribed to more than one Cash ISA this tax year, which is against the rules.
You can find a full list of Cash ISAs which accept transfers here:
Hi I think I have confused myself.
I put the full allowance for 2012/13 in March 2013.
Now I've opened a new ISA with the same bank in May 2013. I think I wanted to transfer the existing one so that my current ISA balance would be £5640 + 5760. Instead I have two ISAs open with the full amounts in each.
Is this okay or have I done anything wrong?
No you've not done anything wrong.
If you wanted you could pay into a new Cash ISA each tax year, so after 10 years you could have 10 different Cash ISAs!
Under the current rules you can't pay into more than one Cash ISA during the same tax year.
If your new Cash ISA accepts transfers from previous Cash ISAs then you should still be able to arrange for the balance paid into your 2012/13 Cash ISA to be move over to your new account.
You will need to do this through your bank though rather than moving the money yourself.
Thank you for you response Martin.
Is it better to have several ISAs open or to transfer the old ISA balance to the new one and have a single cash ISA?
This is really up to you, and depends on the interest rates of your different accounts, how easily the funds in each account can be accessed and how you like to manage your money.
If you're new ISA pays a significantly better interest rate it may be worth moving otherwise you might be content keeping them as they are.
Hi, I will be going to live in Spain from next year. Can I still pay into my ISA and get interest?
Hi, I'm still confused about what happens when you reach your ISA limit for the year. I currently have an ISA that I started on 3 April with just under £5k. As I pay in £200 monthly, I have now reached over the limit of £5760. What happens now?
The Tax year runs April 6th to April 5th the next year, it is not a calendar year or a year from when you opened the account. Therefore any money you put into the ISA between 3rd-5th April 2013 would have been from your 2012/2013 allowance which was £5,640. The £5,760 is your 2013/2014 allowance.As you say you are contributing £200 a month then I am guessing most of the money was put into the account as a lump sum when you opened it, ie from last years allowance. Or was maybe transferred from a previous years ISA, which would not count towards your new 2013/2014 allowance.Whatever was in the ISA prior to April 6th and the start of this new tax year does not count. Your £5,760 allowance is for NEW money which is to be added between April 6th 2013 and April 5th 2014.Hope this helps.
I've been using and taking advantage of the cash ISA's for years now, however over the last year, restrictions on what you can do have really annoyed me. Last year, like this year, because I didn't have my full amount to invest when reinvesting my ISA, I paid in an amount and then topped it up to the allowance I was allow for that year, again I did it this year, with £1600 still of my allowance to invest, however, I then found out with this years ISA account I couldn't invest anymore money into the account because there was a limited period in which you could add money post opening the ISA which I was never told about (should have read the fine detail), I find this unfair as I'm only allow to invest in 1 cash ISA per year, but not allow to use my full cash allowance for this year. It seems savers are getting even more of a raw deal from banks nowadays with all the restrictions on investments compared to people that borrow money from banks.
i want to take out a cash isa and withdraw £200 a month from it is that possible
Yes, it's possible, but once that money has been withdrawn it cannot be put back in the same tax year,
You're welcome! And sorry for the typo - it came out as 'price' when it should have been 'once'!
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