cashing-in cash ISA / transfer issue

mike_riley

Hi there
I have a cash isa currently with M&S and thought about re-investing the money elsewhere. I've read that to transfer to another cash ISA you shouldnt cash it in but "transfer" it formaly as you lose the tax benefit. Can someone explain this to me? If i simply cash it in (and say put the money into a bank account,) surely i will get the interest tax free as noted on my statements? How therefore do you lose the tax free benefit if you re-invest it in a seperate cash ISA a month or 2 down the round?

Thanks in advance

Mike

isasmurf

gizmoleeds wrote:

It is to do with the £3,000 per year limit. If you have £1,000 in your M&S ISA, and you took it out, then put it in a Barclays ISA (for example) then there would be no problem.

It would be a problem, because you have saved in two separate Cash ISAs. Even if an ISA is closed and you had made a deposit in it during the same tax year as your new one it still counts towards your 1 ISA a year unless it has been formally transferred.

If you did close an ISA and then wanted to save in a different ISA later in the year, I'm not sure how you would go about transferring your ISA rights as the old bank would claim they don't have an ISA in your name???

Paul_Herring

mike_riley wrote:

If i simply cash it in (and say put the money into a bank account,) surely i will get the interest tax free as noted on my statements? How therefore do you lose the tax free benefit if you re-invest it in a seperate cash ISA a month or 2 down the round?

You will get any interest accrued so far tax free, but having withdrawn your previous year's ISA you are unable to put them back in an ISA so you won't get any future interest tax free.