Transfering to new ISA-good idea?

moneymabel

Hi,
I have been reading that a lot of you have been having trouble with transfering to a new isa provider at the end of your 1 year term. Stupid question i know but what is the benefit of transfering versus just closing your existing isa, taking the money and opening a new one? Is there a major loss of interest? sorry for the daft question but will be starting saving in earnest at the end of this year and will want to probably open a new isa in april. Thanks for any replies.

emma396

u will lose tax free allowance, the money will withdraw and pay in again will count as this years allownace.

moneymabel

aaah i see, was thinking there must be a good reason! thanks very much for your reply emma

isofa

You cannot withdraw the money from one ISA and then deposit it into a new one without losing the tax free status of the money - unless you initiate a transfer from one provider to another (usually handled by the new provider/account).

For example, let's say you had £10,000 in a Cash ISA and withdrew and closed today.

If you have now already used your yearly £3600 cash ISA allowance, you will not be able to add any of this £10,000 money into an ISA (existing or new).

On the other hand, assuming you haven't used your yearly £3600 cash ISA allowance, you could go and open a new cash ISA, with £3600, but the remaining £6400 couldn't be added, and effectively the whole 10K has lost it's tax free status.

However ,if you transfer to a new provider, the whole 10K goes into the ISA, and then if you haven't already used your allowance, you can add a further £3600 into the balance, bringing it to £13,600 all tax free.

Unless you really need the money, never close a cash ISA, transfer it to a better paying account.

Top paying cash ISAs which accept transfers in (not all do) are listed here at Moneyfacts.