Opening ISAs rules...

eyesy

Hi

I opened a cash mini ISA with Smile around five years ago. I paid some money into it earlier this tax year but haven't yet used up my £3K allowance.

I noticed that Alliance & Leicester are offering a better rate so I decided to go with them and have just opened up an account with them with the intention of transferring my Smile ISA across to it.

Only afterwards did I wonder, if it's "ok" legally to do that, i.e. I thought that you can only open one mini ISA per tax year; does paying money into an existing ISA constitute opening a new one every tax year?

In other words - is what I have done OK or should I contact A&L to cancel the account?

Hope that this makes sense...

Thanks!

Isaac

ReportInvestor

What you did was against the ISA rules.

You have made contributions to two separate mini-Cash ISAs in the same tax year. I think it's best to write and cancel the second ISA with A&L, explaining your mistake, to minimise any error in the eyes of the Revenue.

And then transfer across your Smile ISA to A&L, if A&L are happy with that.

pennies2pounds_3

ReportInvestor wrote:

What you did was against the ISA rules.

You have made contributions to two separate mini-Cash ISAs in the same tax year. I think it's best to write and cancel the second ISA with A&L, explaining your mistake, to minimise any error in the eyes of the Revenue.

And then transfer across your Smile ISA to A&L, if A&L are happy with that.

Correct me if I am wrong, but you have to open the new ISA ( A+l ) first and then transfer it over from your old provider . So what the op did is ok if as he has said JUST opened a new one with Alliance & Leicester and has not put more than the allowed limit of £3000 in either in this tax year. The OP is going to transfer and close the one with Smile. I have just opened an ISA with Alliance & Leicester and have sent the transfer form to my old provider. Hope this helps the OP.

ReportInvestor

Ask A&L for clarification, if there's any doubt.

Did you add to your original ISA in this tax year p2p, like the OP did, as well as opening a new one at A&L?

codetown

eysy,
you have done the right think, i.e. opened the A&L Direct ISA account with the intention to transfer your past ISA money in when accepted by A&L.
This is exctly the procedure you have to follow to transfer money in the A&L Direct ISA. (and the same they describe on the A&L web site).

Of course you needed to open the A&L ISA account to get its number and pass it to Smile to transfer the money out! So it is all correct. There is no mistake nor any other way to trasfer your ISA provider.
This is fully legal as ISA transfers are perfectly allowed at any time!

Once you get the A&L letter/ISA package with your ISA number, you have to use the A&L ISA transfer form. They will send you one almost complete if you requested the trasfer during your application. You just complete it with the reminaing data (how much you want to transfer and where from) and send it to Smile. They will then do the money transfer into A&L Direct ISA.

jonesMUFCforever

By opening a new A&l Isa we presume you have paid money into it.
If so you have broken the Isa rules.
What the A&L should have done is prepare forms for you to open a new Isa together with a transfer request to Smile and let them get on with it.
Beware some institutions do not have the facilty to accept inward transfers. I hope that A&L is not one of these for you.

pennies2pounds_3

ReportInvestor wrote:

Ask A&L for clarification, if there's any doubt.

Did you add to your original ISA in this tax year p2p, like the OP did, as well as opening a new one at A&L?

Nope - gonna add £3000 when it gets in to A+L - banks and building societys always come up with good new ISA's about now so I wait until about now before I look round and change.

ReportInvestor

So you're in the clear, rules wise.

I usually go for mine soon after 6 April to get a full year's tax free interest.

eyesy

OK to clear things up:

I opened the Smile ISA in 2001 I think. Every year - including this year - I have paid some money into it.

This week I opened my ISA with A&L. I have not paid a penny into it and the only money I want to put into it is the money that's in my Smile ISA by transferring it across.

When I looked on the A&L website, it said that to transfer money into a new A&L ISA you must first open the account, and THEN do the transfer....

Hope that clears things up - maybe someone can confirm if I can go ahead then? :-)

Thanks all so far.

ReportInvestor

If you've not paid any money into A&L it should be OK , especially since their blurb, as you describe it, seems to cover you.

Although A&L are not 100% clear in their online blurb.

"Transferring existing ISA funds

How do I transfer my existing ISA funds to my Direct ISA?

If you have previous tax year subscriptions in another ISA, you can transfer them into your Direct ISA. This does not affect your £3,000 yearly subscription allowance. You must open a Direct ISA before transferring existing ISA funds."

But the Inland Revenue site did suggest, I think, that you could fill in an application for with a new ISA manager, accepting their terms & conditions, prior to transferring .

Sorry for any worry caused . I should have asked if you had paid any money into your new ISA in my first post.

codetown

Not sure how other institution do this, but what A&L does is very logical.
You simply apply for the Direct ISA (when eysey said "he opened" he most likely meant "applied"). If they accept you, they give you an account number.
You need this number to get money in!!!

Being an Internet-only account (Direct ISA), there would be no way to do anything differently! Only once you have been accepted and get your account number, THEN you can put money in.
In case of transfers-in, with your accpeptance letter and number they also send you a Transfer form. You complete it and bring/send to your previour ISA provider. They will then automatically pass the money to A&L in the right account (with all interest calculated to the last day with them) and it will be shown into your online window about 7-10 day after (even if it is credited and starts getting interest from the first day A&L receives it!).

I have done this few weeks ago.
So be sure this is the process!