Interest on ISA transfers

marymo_2

Hi

I have just opened a new ISA, and was wondering how the transfer of my old funds works.
I don't want to loose the interest I have earned so far this year, but also want to take advantage of the higher interest rate I managed to get
Transferring from B & B easy ISA to Alliance and Leicester

Thanks, any comments greatly appreciated.

Baldur

Simply complete A&L's ISA transfer form and let them arrange the transfer.

B&B will close the account and transfer your funds, including interest accrued to date of closure, to A&L.

spike87

I am in a similar situation. If you've already used your £3,600 allowance this year, how can they add the interest to the account? This will then mean I'll be earning interest with my new provider on the £3,600 invested this year, and the interest from my old provider. (If that makes sense!)

Baldur

spike87 wrote: »

I am in a similar situation. If you've already used your £3,600 allowance this year, how can they add the interest to the account? This will then mean I'll be earning interest with my new provider on the £3,600 invested this year, and the interest from my old provider. (If that makes sense!)

That's the whole point of Cash ISAs, that interest earned is tax free ad infinitum - many of us who have saved the maximum annual allowance in Cash ISAs since they began in 1999 (plus the previous TESSAs) will have around £50,000 of funds earning tax-free interest.

spike87

I understand that. I should have explained a bit better.

1. I put £3,600 in a cash ISA in April
2. In December I transfer the £3,600 to another provider
3. My exisiting provider transfers the £3,600 along with the interest earned between April - December (lets say £100 interest)
4. My new ISA now has £3,700 in it.

Will my new ISA provider pay interest on the £3,700 for the rest of the year?

Baldur

spike87 wrote: »

Will my new ISA provider pay interest on the £3,700 for the rest of the year?

Of course. As I said previously, that's the whole point of Cash ISAs.

<Edit> The £3,600 annual allowance is ony relevant to NEW money which you subscribe to an ISA, interest earned within the ISA is, and remains, tax-free as long as it remains in an ISA. A transfer is just moving your funds from one provider to another within the tax-free ISA 'wrapper', so the new provider pays interest on all of the ISA funds received from your old provider.

If you subsequently decide to transfer the account to a different provider, then that provider would pay interest on the total funds transferred including all accrued interest, and so on and so on, for as long as ISAs exist.

marymo_2

Thanks everyone.... I have done the transfer to Alliance and Leicester - really pain free, all sorted out and money moved within 2 weeks.....:j

At least I will be getting some interest - not the 1.05% B & B were paying !