A taxpayer asked about moving some of their funds around
HMRC has shed light on the rules surrounding ISAs. The group shared some details in response to a request, while acknowledging that its ability to help with such queries can sometimes be limited. A taxpayer reached out to the tax authority with some questions about a maturing SAYE scheme.
The Save As You Earn (SAYE) scheme allows a person to purchase shares with their savings at a fixed price, with the potential to save up to £500 a month. They wanted to know if there was a cap on the amount they could transfer from their SAYE scheme, specifically if it was limited to £20,000 annually. They also queried whether there was an option to sell the shares once transferred, similar to a flexible ISA, allowing them to withdraw the cash and reset their ISA allowance, so they could make another £20,000 transfer from SAYE into an ISA.
In response, HMRC directed the individual to an advice page on the Government website with information about the SAYE scheme. However, the taxpayer responded saying this did not answer their question.
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HMRC then said: “Please be aware we have limited knowledge of how ISAs are managed and we suggest you speak to your ISA manager before making any transactions.” ISAs offer the benefit that all your savings and investment growth are non taxable.
However, you can only deposit up to £20,000 a year into ISAs. Certain ISAs products are flexible, meaning you can replace funds that you have withdrawn during a given tax year, without this impacting your ISA allowance.
Other accounts lack this option, meaning any deposit you make into your ISA will be deducted from your ISA allowance, even if you’re merely replacing previously withdrawn funds. Another aspect to consider when selecting an ISA is whether the interest rate is fixed.
Opting for a fixed rate means your interest rate will remain constant throughout the account’s term. However, this often comes with a penalty should you choose to close the account early.
This penalty typically equates to a certain number of days’ interest. Therefore, it’s crucial to thoroughly read the terms and conditions to ensure the account you select suits your needs.
Many savings providers have recently lowered their rates following another reduction in the base interest rate by the Bank of England. The central bank decreased the rate from 4.25 percent to 4 percent in August.