1. You can't invest more than £5340 in a cash ISA account per tax year - THEY WON'T LET YOU!
2. At the anniversary date you will receive the interest paid tax free (@ 2.85% in your example) and if you leave the money saved with the same institution then you will receive the appropriate rate of tax free interest in year 2 and so on.... paid on the principal sum plus interest earned.
3. You can transfer this cash ISA to an alternative supplier at any time to get a better rate of interest subject to certain conditions eg in year 1 the whole amount has to be moved.

Hi guys, I am considering taking out an online ISA account and was wondering how things work with the Interest rate all the banks quote. For example, I know that on the the first £5,340 I put into the account I will get the interest rate they all advertise - for example on this Virgin Account That's 2.85% (P.S. I know this example account only allows you to invest the £5,340 a year by the way - just using it as a theory example!) - that all makes sense....

So if I invest more than the £5,340 how much interest do I get on that money? Is it still 2.85% BUT this time it is taxed and so receive less effectivley? So earning tax free 2.85% on the first £5,340 and then 2.85% TAXED on monies above invested above £5,340??

Also the £5,340 is tax free interest is per year yeh? So every year following its first year does it still acrue interest tax free or is it just the year it was invested?

Thanks guys!

dubbs