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ISA transfer rules explained

ISA transfer rules explained
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An ISA is a great way to invest and grow your savings tax free. If you have one, you can transfer it to another provider if you so wish, provided you follow the ISA transfer rules.

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

Possible reasons for an ISA transfer

It’s probably a good idea to transfer your ISA for the following reasons:

Poor service

The returns and service can vary between providers. If you think you are not getting the best deal, you may want to consider changing provider. If you have not yet found a provider, check out our selection of cash ISA reviews.

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.

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.

Changing investment strategy

If you have built up savings in a cash ISA and now want to invest in the stock market, the ISA transfer rules will allow you to do this. Alternatively, you might be nearing retirement and want to switch to lower-risk investments.

Types of ISA transfer

According to the rules, you can undertake the following types of ISA transfer:

  • Between different providers
  • From one product to another with the same provider
  • From one type of ISA to another (eg: from a cash ISA to a stocks and shares ISA)

Important rules to preserve tax-free benefits

If you want to retain the tax-free wrapper on your savings, it is important to note the following:

Use the transfer service available

If you withdraw savings from previous years without using the transfer service, 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.

According to the ISA transfer rules, if you want to keep the tax-free benefits from previous years, you will need to use the transfer service available from your provider.

Transfer the total amount from the current tax year

If you want to transfer an ISA in the current tax year, 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.

Don’t transfer to a different named account

You will lose your tax-free allowance for that year if you move your ISA to a different named account.

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.

ISA transfers from previous years are unlimited

You can make any number of ISA transfers in a given year, as long as you use the transfer services.

The total amount transferred is unlimited

Similarly, there is no limit on the total amount that can be transferred from previous years.

Transfers are not counted in your current year’s allowance

So, imagine you have a current ISA with £5,000 and you transfer in £20,000 from a different ISA 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 can transfer all or part of a previous year’s ISA

With some accounts, you can transfer a portion of a cash ISA or a stocks and shares ISA into a current ISA.

Things to look out for

Before you make a commitment, there are some important considerations to be aware of.

Not all ISA’s accept inward transfers

This will depend on the provider, so it’s worth checking with them first.

Fees and charges

Many providers will charge for an outward transfer, so it’s worth checking beforehand. If you want to transfer a stocks and shares ISA, make allowances for any share dealing charges.

Penalty fees

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

Take home

It’s worth speaking to your provider about the ISA transfer rules if you are considering transferring your ISA. They will explain the terms and conditions that you need to know before you make a commitment.

Further information about ISAs is available on the gov.uk website.

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