The Personal Savings Allowance
In April 2016, the UK government changed legislation regarding the tax paid on income you earn from interest on your savings. Now, the following rules apply:
- Basic rate (20%) taxpayers can earn £1,000 interest with no tax,
- Higher rate (40%) taxpayers can earn £500 interest with no tax,
- Additional rate (45%) taxpayers don’t receive an allowance.
The savings income that counts towards your Personal Savings Allowance includes:
- Interest from banks, building societies and other account providers,
- Interest distributions (but not dividend distributions) from authorised unit trusts, open-ended investment companies and investment trusts,
- Income from government or company bonds,
- Some types of purchased life annuity payments and gains from certain life insurance contracts.
An ISA is an Individual Savings Account. They allow UK taxpayers to benefit from tax-free interest on their savings – so the interest you earn is all yours.
As Cash ISAs already feature tax-free interest, the Personal Savings Allowance doesn’t apply to them, which means you can really make the most of your tax-free savings.
Not only is your money tax-free now, it will remain so in the future - regardless of any changes that may be made to the Personal Tax Allowance by future governments.
The UK government sets a maximum amount you can invest in an ISA in each tax year. This is known as an ISA allowance and it can be split between Cash ISAs and Stocks and Shares ISAs.
The ISA allowance for the current tax year 2022/2023 is £20,000.
Note: Tax treatment is dependent on the personal circumstances of each customer and may be subject to change in future.
Making ISAs easy
At Ford Money it is important to us that your money does what you want it to do - that it’s accessible, while still benefiting from the best rates we can offer. We therefore offer both ISA Flexibility and ISA Portfolio features with our Cash ISA products.
What does this mean for your ISA money?
Each tax year you can choose one provider with whom to hold a Cash ISA. In order to give you maximum flexibility our Cash ISA products operate as a Portfolio ISA, which allows you to spread your current Cash ISA subscription across multiple Ford Money Cash ISA products. This will give you greater freedom to manage your savings around your own needs. For example:
If you had £20,000 to invest, but did not want to lock it all away for a fixed term, you could split your cash between several of our products. This could mean putting £5,000 in a Flexible Cash ISA, £5,000 in a 1 Year Fixed Cash ISA, and the remaining £10,000 in a 2 Year Fixed Cash ISA.
We also accept “Transfers-in” of prior year ISAs and you can spread this money between products as well.
What’s more, all Ford Money Cash ISAs have ISA flexibility, meaning that you can withdraw and replace money from your Ford Money Cash ISA in the same tax year without losing any of your tax-free entitlement. For more details on ISA flexibility and ISAs generally visit the HMRC website.
Please note: some ISAs, such as those with fixed terms, impose a term breakage charge for early withdrawals, so make sure you check your Terms and Conditions.
You can hold a maximum of £2,000,000 in our ISA accounts (excluding Regular Cash ISA), so you can transfer in any ISA balances you have from previous tax years whether they’re with Ford Money or from another provider.
If you’re 16 years of age or older, and a UK resident with a National Insurance number then you’re eligible to open an ISA. If you don’t have a National Insurance number, it may still be possible for you to open an ISA. Call us on 0345 266 1231 for further details.
The ISA tax year
The tax year runs from 6th April to 5th April.
Joint accounts with differing rate taxpayers
If you have a joint account and one of you pays a higher rate of tax, the interest earned is assumed to be split equally between you. For instance, if one of you is a basic rate taxpayer and the other a higher rate tax payer, then your joint Personal Savings Allowance would be £1,500.
How to pay savings tax if you owe it
If the interest you earn exceeds your Personal Savings Allowance, HMRC will usually collect tax on the excess by changing your tax code in the PAYE system. If you complete a Self-Assessment tax return, you should continue doing so as normal. Further information is available on the HMRC website.
Note: Tax treatment depends on the individual circumstances of each customer and may be subject to change in the future.