Hi,
From various conversations with 212 on chat they have told me that in order to get the interest I am accruing daily from my cash ISA the only way to access it is to withdraw the whole amount in the isa then the final part of that withdrawal would be the interest. They have also told me there is no way to transfer this into the Cash ISA even if I have room left on my allowance. This seems overly complicated and any time I would want to access the interest I would need to withdraw the cash ISA (up to ÂŁ20k) to a bank account and put it back in the ISA again. Has anyone else had this issue and found a way to get around it please?
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Amy - you’ve either misunderstood the answer or been given some duff information from the bot I’m afraid. Interest in the Cash ISA is paid onto the balance of the account after you deposit your money, you shouldn’t need to do anything else.
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Hi Amy/Scrooge, I’m getting the same response at present whereby any withdrawal is coming down from the cash isa balance and not the interest amount - currently awaiting a response from the help centre
Scrooge - when you say “..paid onto the balance… after you deposit your money..” - is this an extra step that needs to be actioned after the interest amount appears in the account? thanks
I’m getting the same answers. I don’t think Scrooge understands what we are asking.
We want to have the interest paid or transferred into our personal bank accounts not held in limbo in the trading 212 account. How do we manage this interest payment across to our personal accounts without withdrawing it from our ISA allowance. I can’t find an easy way of doing this.
No, Scrooge is right, if maybe not as polite about it as he could be.
The interest goes into the same pot, it isn’t treated any different than the principal.
And taking money out does not decrease your allowance. Since the Trading 212 ISAs are flexible, it actually “increases your allowance”.
Which means, whatever you took out you can pay back in, as long as it happens in the same tax year.
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You 100% do not want to do what you are trying to do.
ISAs here are flexible.
What this means is if I deposit £20k at the start of the tax year, and earn say 0.5% interest over the month so £100 my balance if it started at zero is now £20100. Let’s say something happens and I need access to the funds, I can then withdraw £20100, and have the option to add a further £20100 back in the tax year if I have the funds.
You need to manage your own funds and withdraw what you need to spend from your ISA.
If a cash ISA provider paid interest directly to your bank account, you would effectively lose that extra ÂŁ100 allowance.
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I have had the same discussion with two separate support members and have been told if you want to withdraw interest, you need to withdraw the complete balance and then pay back the investment amount without the interest. I think the Trading212 system is flawed if you intend to use the interest generated from your cash ISA for anything else rather than re-investment back into the cash ISA. A good scenario is if you invest ÂŁ20,000 in year 1 which generates ÂŁ1,000 interest. You then invest another ÂŁ20,000 in year 2. In order to withdraw the interest from year 1, you need to withdraw ÂŁ21,000 and then transfer ÂŁ20,000 back into your Trading 212 account to maintain the maximum cash ISA investment. The app is unable to differentiate whether you want to withdraw from interest earned or from the investment amount.
I am now concerned that I have some major misunderstanding of the Cash ISA.
In what sense is the interest added to the balance distinct from the balance in terms of withdrawal?
If you earned £100 in interest and withdrew £100 you’d be back to your original balance regardless of “which” pounds you withdrew surely? Isn’t money fungible in that sense?
The interest doesn’t form part of your cash ISA investment. The cash ISA is flexible meaning you can withdraw and re-invest into the cash ISA during the financial year up to the max £20,000 per year limit. When you gain interest, this interest goes into your cash ISA account but doesn’t add to the amount you have invested. For example, year 1 you invest £20,000 and gain £1,000 interest. Your cash ISA balance will be £21,000 but you will be able to invest another £20,000 in year 2. Your account would show a balance of £41,000 which looks like it exceeds the £40,000 limit but the extra £1,000 is from interest and you have only directly invested £40,000. When you withdraw from your account, it will reduce the investment amount for that year, even if your intention was to just withdraw the interest. If you took the £1,000 interest out which was gained from year 1, my understanding would be in the app it shows the £1,000 coming from the £20,000 invested in year 2. It would technically mean when you report to HMRC, you have only got a total of £39,000 invested, £20,000 from year 1 and £19,000 from year 2 although your account would show a balance of £40,000 which includes the interest from year 1. Its all very confusing if you ask me, there should just be an option to either a) withdraw interest or b) nominate a different account to have the interest paid into.
I think you’re seriously overthinking something in an incorrect way. But, I have commented here to track this to see if there’s something I have missed in my own understanding.
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As I understand it, if I put in £20k in year 1 and earn £1k interest then the next year the balance is £21k all of which is earning interest, so all “invested” in that sense. That £1k interest doesn’t reduce the current or the next year’s allowance. In year 2 I can add another £20k regardless, even if I withdraw £1k from the account first. In fact, because it’s a flexible ISA I could withdraw that £1k, add £20k, and then put that £1k back in within the same tax year.
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If you have already invested additional money in year 2 before withdrawing the ÂŁ1k interest, i.e. another ÂŁ20k making the balance ÂŁ41,000, when you withdraw the ÂŁ1k, the account balance shows ÂŁ40,000 but the amount invested in the current year will show ÂŁ19,000 in the app. If the ÂŁ1,000 interest forms part of the investment, surely the available investment amount would start off at ÂŁ19,000.
If you added £20k your ISA allowance would show £0 available because you’ve added the full £20k for that year. Because the ISA is flexible if you then withdraw £1k you can put it back in. It’s got nothing to do with the interest.
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If you remove the multi year investment scenario and say you wanted the interest out of your account in 2 months from investing, you have ÂŁ100 interest. When you withdraw the interest in month 2, it will show as ÂŁ19,900 invested in your cash ISA but the balance would be ÂŁ20,000 in the account. If you just wanted to withdraw the interest at regular intervals and retain a full ÂŁ20,000 invested in your cash ISA, you would need to withdraw ÂŁ20,100 and then put ÂŁ20,000 back in. It seems counter intuitive to me to do it that way.
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Isn’t that just because within the same tax year you can put back in what you withdraw? If you take £100 you want it to show you can’t put it back? You want it to not show the interest as part of the balance? I don’t get it?
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100% this.
I will try and explain again.
The ISA allowance for adding new money is 20k a year.
At the start of a new tax year, this resets back to 20k.
If the first thing I do is withdraw 1k, it doesn’t matter if that is from the 20k I deposited in the previous year, or the 1k interest I earned. In the current year, my current year deposit allowance increases from 20 to 21k.
If you withdraw anything from any ISA, be that part of your initial deposit, gains on a stock, or interest on a flexible ISA, it increases your current year allowance by the same amount in the current tax year.
That is the point of a flexible ISA.
So a stocks and shares isa, I invest 20k in Tesla, it goes up 100%, I then need to withdraw 20k because I am over the 20k annual limit? This is your flawed logic. Any gains or losses in your ISA, be it cash, dividend or capital gains do not contribute to your ISA deposit limit.
What you can do with any flexible ISA, is any amount you withdraw can be added back to the ISA within the same year. That’s why any withdrawals from a flexible ISA, increase your ISA deposit limit.
Edit: it’s worth reading the help guide:
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I think you are misunderstanding. The original posters question was how do you withdraw just interest from your cash ISA account without affecting the investment amount. The quick answer is you cant without withdrawing and then re-investing. I believe a lot of this stems from the confusion about how the interest is calculated. If interest is compounded (as I believe it is with Trading212) and paid on the balance shown in the app, it doesn’t matter if the balance is made up of investment or investment and interest. If the interest wasn’t compounded, and just paid on the investment amount, you would lose out in interest if you made a withdrawal.
There is no penalty on withdrawals, it’s an easy access ISA. You do not lose interest earned, it’s calculated on your daily balance and paid monthly.
Thanks for all, My concern now then would be the interest amounts>
If the interest earned on the original 20k contribution is left in the account - does that interest also figure in the following periods interest calculation?
If so, how does that figure in the UK tax such that it is then a taxable amount or a non-taxable amount? i.e. the interest on the 20k is non-taxable, but the interest on the earned amount is taxable (or not?)
There’s no tax on UK ISA’s. Disregard tax entirely. It’s irrelevant how the interest is earned.
When thinking about Cash ISA’s it’s best to use the term deposits rather than investment. It’s just a savings account, so investment muddies the water.