To make more money from your investments you will need to move your ISA to one that will do better for you.
You can save £15,240 a year in a lovely, tax-free ISA, but you don’t have to leave it in the same one year in year out. But moving old ISAs can seem complicated.
Read our guide to ISA transfers to make sure you don’t make any costly mistakes.
- What is a ISA transfer?
- Transfer rules for Cash ISAs and Stocks and Shares ISAs
- How to make the transfer
- How long does it take to make an ISA transfer?
- When is it not a good idea to transfer old ISAs?
- Check out the Cash ISA best buys for transfers.
If you have an ISA (Individual Savings Account), or several ISAs, there is nothing to stop you from moving that money about and looking to shift it to a top-rate account to get the most out of the tax free benefits.
You can also move money from ‘Tessa-Only ISAs’ (Toisas) which were around before ISAs, as well as any Personal Equity Plans (PEPs) which will have automatically transformed into a Stocks and Shares ISA.
The only problem is that not all ISA accounts allow you to transfer money in from another ISA, so you will need to check first.
Transferring an ISA can sometimes be complicated and because they are tax-free savings vehicles, you need to follow specific rules to avoid losing that tax relief. The most important of these are that:
- You should NEVER simply withdraw your ISA savings as cash and reinvest into a new account because it will be classed as new investment and taken from your allowance for the current tax year.
- You can transfer a cash ISA into a shares ISA and, from 1 July 2014, you can transfer savings from an existing shares ISA to a cash ISA.
- You can only split previous year’s ISAs so if you want to move money from the current tax year (whether it’s a Cash or Shares ISA) you must move the whole lot and into only one provider. Previous year’s ISAs can be split between various providers and ISA types.
If you have cash ISAs from previous tax years, ALL of this can be moved to another Cash ISA or a Shares ISA, or it can be split into several Cash or Shares ISAs. The same is now true for Share ISAs.
Other rules to be aware of:
- You can move ALL of your old ISAs into one single account if you want to. Simply let the new provider know that you are transferring money from several old accounts.
- You don’t have to pay in new money when you move your old ISA. There is no need to pay in any new money as your balance is simply being transferred and doesn’t count towards the current year’s allowance.
- The annual allowance applies to the amount you put in each year, not your balance.
If you are moving previous years’ ISAs, you can move some into a fixed-rate ISA, and some into an easy-access account with a different provider. You can then use up the current tax year allowance with a different account.
But, if you use up all of your allowance and then take some money out in the same tax year you are not allowed to top it up again in the same tax year.
If you decide you want to make a transfer the first step is to choose the right account – see our best buys below – remember that many of the best buys include a bonus rate so you will have to be prepared to keep moving your money about to earn the best interest.
Once you’ve found a new ISA that will accept transfers you will need to check whether they set a maximum for the amount you are able to transfer in. You may also have to give notice to your current provider that you intend to transfer your ISA.
Now that you’ve got the right account, you need to fill out a transfer form available from your new provider and provide details of the old accounts. You’ll be asked how much you want to move across, and whether you want to save any new money as part of the current tax year’s allowance – remember if you only want to use the account to transfer money from previous years’ ISAs there is no obligation to add anything else.
Your new provider will then arrange the transfer, making sure to keep the tax-free status.
In the summer of 2010 the Office of Fair Trading (OFT) made some changes to allow savers to transfer their ISAs quickly and without losing interest. Cash ISA transfers used to take around 26 calendar days but thanks the OFT’s ruling, cash ISA providers will now complete transfers within 15 working days.
Certain providers like Nationwide, Halifax and Metro Bank have also made a pledge to honour your new interest rate as soon as they receive your application for a ISA transfer. So, you will effectively be receiving that new rate on your money even during the days while your transfer is being processed.
Banks also have to tell you when the headline rate is coming to an end – this gives you time to move that money into a better account before the rate drops.
Before you transfer any money make sure you aren’t going to be charged a penalty by your current provider. If there is a penalty, calculate whether you will actually be better off from the transfer when you take this into account.
It may be worthwhile putting up with a lower interest rate until that penalty period ends if the fee is particularly steep.
Also, take a look at our guide to Shares ISAs (investment ISAs) and discover how to invest in the stock market and get better returns.