ISA transfer rules: how to transfer your ISA

If you have an ISA, you can transfer it to a new account or provider, but you need to follow the ISA transfer rules. Here’s everything you need to know.

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An ISA is a great way to invest and grow your savings tax free. If you already have one, then you can transfer it to another provider of your choosing, as long as you follow the ISA transfer rules. If you are considering an ISA transfer, then you’ve found the right article.

Please note that tax treatment depends on the specific circumstances of the individual and may be subject to change in the future.

What is an ISA transfer?

An ISA transfer involves moving your savings or investments from one ISA account to another. For example, you can transfer your cash ISA to a stocks and shares ISA, or transfer your ISA from one provider to another.

The key thing to remember is that it does not involve you physically removing the funds from one account or provider and investing them with another yourself.

Possible reasons for an ISA transfer

There are a number of reasons you might want to transfer your ISA. Below are four common examples.

1. Reducing fees and charges

Even if you have multiple stocks and shares ISAs with good providers, the fees can add up. This will have a negative effect on your investments in the long term. You may be able to find a cheaper deal elsewhere.

2. Consolidating multiple accounts

Having multiple accounts can potentially be confusing and difficult to manage. Transferring your ISAs into a single account can make it much easier to keep track of your savings and investments.

3. Changing your strategy

Perhaps you’ve always had a cash ISA and are now considering investing some of your savings. Transferring your cash ISA to a stocks and shares ISA will allow you to do this.

4. Poor service

The returns and level of service you receive can vary between providers. If you think you are not getting the best deal, then you may want to consider moving your ISA.

Types of ISA transfers

There are three main types of ISA transfers available:

  1. Between different providers
  2. From one product to another with the same provider
  3. From one type of ISA to another (e.g. from a cash ISA to a stocks and shares ISA)

The best option for you will depend on your personal circumstances.

ISA transfer rules

It is important to follow these rules when making a transfer. If you don’t, then you may end up losing out on the tax-free benefits of ISAs.

1. Use the transfer service

If you withdraw savings from previous years without using the transfer service, then the sum added to a new ISA will be treated as the current year’s contribution. In effect, you will lose the tax-free allowance from the previous year.

2. Transfer the total amount from the current tax year

If you want to transfer an ISA in the current tax year, then you will need to transfer the whole amount to retain ISA status. You can continue to add savings up to the current personal allowance of £20,000.

3. Options for ISAs from previous years

While you are limited in the type of transfer you can do with your current ISA, there are a greater number of options available for ISAs from previous years.

Transfers from previous years are unlimited, meaning you can make any number of ISA transfers in a given year, as long as you use the transfer service. Similarly, there is no limit on the total amount that can be transferred from previous years. These transfers are not counted in your current year’s allowance.

So, for example, say you have a current ISA with £5,000 and you transfer in £20,000 from a different ISA that you opened last year. You can still save an additional £15,000 in your current ISA because the amount transferred is not counted in the current year’s personal allowance.

You also don’t have to transfer all of a previous year’s ISA. Some accounts will also allow you to transfer just a portion of an old ISA into a current one.

How to transfer an ISA

The exact ISA transfer process will vary from provider to provider. The most important thing to remember is that you must use your provider’s ISA transfer service. Don’t try and withdraw the funds yourself.

To find out the specific details about how to do this, you should check with your provider. The information should be displayed clearly on their website and in the documents you received when you first set up your ISA.

How long does an ISA transfer take?

If you’re transferring a cash ISA, then it should take about three weeks. The government website states these transfers should take no more than 15 working days. Other types of transfers can take a bit longer – up to 30 calendar days.

Can you withdraw money while transferring?

You can’t withdraw money during the transfer process without losing your tax-free benefits. If you want to withdraw money, then it is better to wait until your transfer is complete.

Remember, certain ISAs – like the Lifetime ISA – have penalties if you withdraw money early or not for the intended purposes.

Transferring an ‘active’ cash ISA

You can transfer an active cash ISA to a new manager. If you transfer your current-year ISA, then your bank should tell your new ISA manager how much more you can pay in during the tax year without exceeding the allowance.

However, you can only have one ‘active’ cash ISA each year, so you must transfer the full amount. You can’t split your allowance between different ISA managers.

Can you transfer an ISA to someone else?

No, you can’t directly transfer an ISA to someone else. If you want to move funds from your ISA to one in a different name, then you’ll need to withdraw your money or sell your investment and then give the funds to the other person.

Things to look out for when transferring your ISA

Before you commit to transferring your funds, there are some important considerations to think about.

Not all ISA’s accept inward transfers

This varies between providers, so you should always check with them first to avoid being disappointed and not being able to place your ISA where you want.

Fees and charges

Many providers charge for an outward transfer, so it’s worth checking beforehand. This is particularly true if you’re moving to avoid higher fees. You could end up inadvertently paying more despite moving to a cheaper provider!

If you want to transfer a stocks and shares ISA, then you should also keep an eye out for any share dealing charges. These can add up quickly.

Penalty fees

Some transfers will incur penalty fees, which can become quite costly.

If you have a fixed-term account, then you will be charged a penalty fee if you transfer before the end of the term. Similarly, if you have a notice account, then you will be penalised if you move your funds before the end of the notice period.

Should you transfer your ISA?

This is a personal decision and one that will depend on your personal circumstances. If you are considering an ISA transfer, then it is worth speaking to your provider about the ISA transfer rules and their policies. Your provider will explain the terms and conditions that you need to know before you commit.

If you’re interested in transferring your stocks and shares ISA, then take a look at our top-rated stocks and shares ISAs to help you find the account that’s right for you.