Cash ISA Interest

[Jamestheretired]

There has been some discussions relating to interest on Trading 212 interest and no one knowledgable seems to ‘get’ the fundamental question so here goes with rephrasing the question.
Normal Cash ISAs that pay interest monthly ask for a bank account for the interest to be paid into so that they can use the monthly income to help live on. Trading 212 says it accrues interest daily and pays it monthly. It also refers to ‘Pending interest’ that has been earned but not PAID yet. But I don’t understand where this interest is paid to. And trying to withdraw even a single pound appears to take it from my yearly ISA allowance. So how would I use the ISA as a monthly income. Because to the uninitiated it would appear that ‘monthly interest’ and ‘flexible ISA’ are incompatable in the usual sense of the words ‘monthly interest’

[Alien999]

Thanks Jamestheretired , for the explanation as to what i have been trying to get across to the helpdesk without any real helpful reply

There seems to be an added complication possibly(?) in that the interest accrued in itself is accumulating interest as part of the total value of funds - which is probably going to attract attention from HMRC as that part of the interest would then be taxable and not tax exempt as the original ISA interest.. I’ve tried to get a sensible response from 212 but so far just fobbed off with simplistic non distinct replies..
End result being I’m looking at removing all and depositing elsewhere
thanks again

[JMH]

@Jamestheretired Interest is paid into your Cash ISA, and you can see those payments under the Interest tab in History. There is no option to have it paid into another account. You’ll have to withdraw it manually.

On withdrawals, you say it “appears to take it from my yearly ISA allowance”. That is not what happens. A withdrawal returns that amount back to your allowance for the year.

[Scrooge_McCodf]

@Alien999

There seems to be an added complication possibly(?) in that the interest accrued in itself is accumulating interest as part of the total value of funds - which is probably going to attract attention from HMRC as that part of the interest would then be taxable and not tax exempt as the original ISA interest.

This is wrong. You’re misunderstanding how things work.

@Jamestheretired

Normal Cash ISAs that pay interest monthly ask for a bank account for the interest to be paid into so that they can use the monthly income to help live on. Trading 212 says it accrues interest daily and pays it monthly. It also refers to ‘Pending interest’ that has been earned but not PAID yet. But I don’t understand where this interest is paid to

This is also strange and wrong. The interest will be paid into the balance of the account. You’re thinking about fixed rate products I think. You’re completely conflicted though.

@Jamestheretired

And trying to withdraw even a single pound appears to take it from my yearly ISA allowance.

This is correct. This is the behaviour you should expect from a flexible ISA.

[Dougal1984]

@Alien999

in that the interest accrued in itself is accumulating interest as part of the total value of funds - which is probably going to attract attention from HMRC as that part of the interest would then be taxable and not tax exempt as the original ISA interest.

This is wrong. You need to read the HMRC guide to ISAs in which all providers adhere to, but I will try and simplify as perhaps you’ve misinterpreted the guidance or ISA rules:

1. We currently have a 20k new money deposit allowance each year.
2. Anything earned within an ISA, is tax free and does not impact your annual allowance, and remains in your ISA until you withdraw.
3. Anything withdrawn from a flexible ISA, increases the amount remaining that you can deposit to the ISA.

Is there any part of this that still does not make sense / does not answer your question?