Monzo ISA (A complete review)
In this brief guide, we are going to be discussing the Monzo ISA.
In this post, we are going to introduce you to the world of the Monzo ISAs, their best use case and all you need to know about the specific ISAs.e.g which one can help you get on the property ladder or help you save for retirement.
What is the Monzo ISA?
The Monzo ISA(Individual savings account) is a tax-effective way to save. ISAs allow you to pay no tax or the minimum tax on the interest you make on your savings.
To be eligible for an ISA you will usually have to be:
- You must be at least 16 years old
- You must be a UK resident
- And you must have not subscribed to another UK ISA in the same category in the same tax year
So, you are probably wondering what does “subscribing to an ISA” mean. Subscribing to an ISA means paying into and opening an ISA. You are allowed to subscribe to one of each type of ISA every tax year and you must not exceed your ISA allowance each tax year.
How Many ISAs Can I have????
The current tax rules allow you to have or open one of each type of ISA every year but you can only put the maximum tax year ISA allowance in all of these ISAs. This means your combined savings in all your ISA accounts must not exceed your current tax year ISA allowance for the current year. The tax year ISA allowance is currently £20,000.
Can I open a cash ISA AND A LISA in the same year?
Yes, you can open a cash ISA and a LISA in the same year. You can also contribute to a cash ISA and LISA in the same year as long as you don’t go over your personal ISA allowance. You can out whatever you have left in other ISA accounts in the same tax year.
How many Monzo ISAs can you open in one year??❄
You can have multiple Monzo ISAs but not more than one of the same( e.g you can’t have two Monzo cash ISAs) and your total Tax year ISA allowance must not be exceeded in your combined ISA contributions. This means ISAs you hold with Monzo and ISAs you hold with other providers. Each ISA may also have its maximum contribution limit as well. So check the terms.
What to do if you open more than one type of Monzo ISA??ℹ
Although it is very unlikely, if you mistakenly open more than one lifetime or stocks & shares ISA in a single tax year, you should notify your Monzo ISA manager at the earliest opportunity. In some cases, the ISA may be allowed to remain open, once you have consulted with HM Revenue and Customs.
The rules for stocks and shares ISAs are the same as with cash ISAs. You can only pay into one each tax year but can open a new ISA with a different platform each year if you wish to. This means you may be able to further diversify by having one type of Monzo ISA and opening the same type of ISA with a different provider in the next tax year. Contribution rules will still apply.
If you have multiple stocks and shares Isas open, you are only allowed to pay into one of them in each tax year. So, if you only wanted to invest a portion of your Isa allowance via the second Isa provider, this could be difficult as it will mean you are not able to add any new money to the original Isa in the same tax year.
The only other option to consider is transferring your existing portfolio to the other provider, although this might incur some costs.
How do ISA transfers work??✈
ISAs are tax-free saving wrappers and moving them to get a better deal is common. If you move your ISA in the wrong way you could just end up losing your tax-free status and costing you interest made from your ISA. If you want to move your ISA to a Monzo ISA you should contact the Monzo ISA manager.
Why should you transfer your ISA??ℹ
You could transfer your ISA for a variety of reasons such as getting a better rate or because of reasons such as the cost of your current ISA manager or their performance.
You might also be transferring all your ISAs to a new manager to have all your savings in one place or rather move all your savings to different places in a scenario where your combined savings are over the financial services compensation scheme limit of £85,000 per account.
There are a variety of ISA providers out there and you can view their various offerings, including the way they invest, their past returns etc all online so you have an idea of which provider you want to move your money to.
To transfer an ISA you simply open a new ISA account(in this case a Monzo ISA ) then fill an ISA transfer form and send to your old ISA manager. It’s that simple. Once the transfer is done you will get a closure statement showing exactly how much you have transferred.
Be sure to be on the lookout for any charges or transfer out fees imposed by your current ISA manager.
How long does your ISA transfer take??
This depends on what ISAs you are transferring. If you are transferring a cash ISA then this should take 15 days. If you are transferring a stock and shares ISA then this will usually take 30 days.
If your ISA transfer takes too long you can report it to the Financial ombudsman.
Which ISAs can you transfer?❄⌛
You can transfer any ISA although there might be some penalty for ISAs which are fixed-term or notice ISAs. Some ISA providers do not accept ISA transfers.
If you have a notice ISA, it is probably best to give notice to your current ISA provider to avoid any charges.
If you choose to proceed without giving notice then you should compare how much interest the new ISA will earn you and the cost of the penalty. If you still make more money by transferring your ISA then, by all means, transfer your ISA if you wish.
The Monzo ISA is covered by the financial services compensation scheme. This means you are covered by up to £85,000 per account in case anything goes wrong with your Monzo ISA.
The Monzo ISA
The Monzo Cash ISAs are just like saving accounts which pay interest. The interest they pay is tax-free and outside of your personal allowance. Cash ISAs will usually pay a fixed rate of interest or a variable rate.
The Monzo ISA is [provided by OakNorth financial. Weirdly enough the rates on the Oaknorth Financials website for the exact same products are better than what Monzo is offering its customers.
The personal savings allowance which gives you £1000 tax-free depending on your tax band. This means basic-rate (20%) taxpayers will be able to earn £1,000 interest with no tax while higher-rate (40%) taxpayers – will be able to earn £500 interest with no tax. Additional rate (45%) taxpayers don’t get a tax-free allowance.
To open a Monzo cash ISA you will have to be:
Over 18 years old
A Uk resident for tax purposes
Be a crown employee serving overseas
Or be married or in a civil partnership with a Crown employee
A Monzo Cash ISA can be easily opened in-app. The maximum you can put in them is your personal tax allowance which currently stands at £20,000. But with the Monzo ISA you can withdraw and put more money back and this won’t add to your annual ISA allowance as the Monzo ISA is flexible.
You may also be able to transfer funds from an old ISA account into your Monzo ISA account.
To open the Monzo cash ISA account you will need a minimum of £500 and you can then go on to contribute up to your maximum ISA allowance of £20,000 taking into consideration any other ISA contributions you may have made that tax year.
You can manage your Monzo cash ISA account via the Monzo app.
You can cancel this account within 14 days of opening it.
Cash ISAs are usually considered a safe investment vehicle. They are covered by the financial services compensation scheme up to £85,000 per account.
The information provided on this page about the Monzo ISA is accurate at the time of writing. You should check with the Monzo ISA website as some of the information on this page may have changed.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.