ISA annual limit - i feel stupid asking this but...

[CurlyhairedAssassin]

Right. I know the annual limit for ISAs is 20k. But what does this MEAN exactly? I have looked online and all I can find is loads of info saying “you can save 20k per year tax free” etc

But what happens at the end of the tax year if you have put the full 20k in and not withdrawn it and want to save another 20k the next year?

Does the money in it just build up and up? All tax free and all at the same rate of interest?

So....it’s possible to save the maximum allowance EACH year and just leave it all in there, building up to quite a large amount over a number of years with ALL of the money earning interest that is tax free?

And can you transfer the WHOLE amoUnt to a different ISA each tax year to get the best rate or is that limited to the tax-free allowance of 20k or whatever it would be in future?

I have an inheritance due and would like to maximise tax-free savings but unsure about the most bloody basic thing like this!

I do understand that you must fill in transfer forms to transfer to a different ISA and not just withdraw the money.

I currently have a shit rate cash ISA with Barclays. Will look to switch in April to better rate of interest but I just can’t visualise what’s happening tax wise.

Apologies if I sound thick. I’m not. Even Moneysavingexpert doesn’t seem to give advice about going OVER 20k in your ISA savings.

The limit is per year. Anything in there stays in there until withdrawn.

Some people may have £100,000, for example, in an ISA and interest on that would be tax free. They could also transfer that amount to another ISA.

Yes, you can save £20k in an ISA this year, and £20k in the same ISA next year (or the same total amount across more than one).

Individual ISAs will have limits to what you can save in them (signing off documentation for them is part of my job & the one I was looking at this week you could have up to £1m in).

Thanks. I thought that was probably the case but just wanted to check.

You can get another account in April and add another £20k, you can also open a fixed rate ISA and add £20k, and add last years money, as that would be ‘old’ money and wouldn’t count as the April 2018 (unless you cashed the ISA in to your bank account). So...
April 2017/18 £20k (old money)
April 2018/19 new money.
As long as you transfer your old ISA to another ISA account, you will not get have this counted into the new tax year.

As others have said, the limit is per year. You will have to weigh up the benefits of perhaps having a longer term fixed rate, say for 3 - 5 years, which you may not be able to add to with the convenience of having more money in the same place. However, stay mindful of the Financial Services Compensation Scheme limit - from 30/1/2017 it is 85K unless you have a temporary higher limit (check what is covered) - i.e. try not to have more than 85K with the same provider (some are linked like First Direct and HSBC, so the limit applies across all their products). Of course there is nothing to stop you putting 20K away this tax year and then opening up an ISA with another organisation in the new financial year in April. Just keep a record of how long you tie up your funds so you move them as soon as your fixed rate finishes. Equally, if you know you will want to transfer money, make sure your new ISA accepts transfers in - some limit you to the first few months after you have opened your new ISA.

Thanks,,Lady.

I’m aware of the FCS thing, but wondered if anyone REALLY sticks to the 85k per institution guideline. I mean, in the grand scheme of things for a lot of multimillionaires, 85k isn’t that much, is it? There must be people with bank accounts with a lot more than that in? Or Is it that they are SO rich they could afford to lose a million from one bank of the highly unlikely crash happened, as they’d still have millions elsewhere?

Just wondering how people with a lot of money weigh up risk like that. (I won’t come into that bracket by the way!)