Can someone help me with ISA's

laurajo87

Hi

Can someone help me please?

My father has an ISA account with RBS, which he has £6k in. He went into his branch this morning to find out what he could do with his ISA as the rate of interest he is being paid is cr8p something like 1%.
RBS have a cash isa plus account which says you cannot transfer money in. He asked 'what if i close my isa account and then put the £6k into my current account and then open the new cash isa plus and put in the full tax allowance of £3,600?
The woman at the branch advised him against it as she said he would be taxed from when he first opened his account and would lose alot of money
As my father is a pensioner, he doesn't contribute into his ISA on a monthly basis as it affects his state pension, so he hasn't put in the tax free isa allowance for a number of years now

a) is this woman correct in what she is saying?
b) if she is, what is the best way for my father to transfer or open a new ISA account which is better than the rubbish rbs 1% interest rate?

Can anyone help as I really don't understand how my father can be taxed or lose money if he was to transfer or close his ISA and move it to another ISA with the same bank?

Thanks :rotfl:

whu

He would lose his ISA for good if he were to close it and the tax fre benefits- he should transfer it to a better paying ISA by going into the branch of the provider he wants to join and signing a form and they will arrange the transfer- that way he wil kep his tax free status - have a lok at moneysupermarket.com for the best ISA rates that allow transfers in

Baldur

laurajo87 wrote: »

a) is this woman correct in what she is saying?

Yes - as soon as funds are removed from a Cash ISA account, any interest earned by them becomes taxable.

b) if she is, what is the best way for my father to transfer or open a new ISA account which is better than the rubbish rbs 1% interest rate?

As whu has said, transferring the ISA will maintain its full tax-free status. Take a look at this post, which shows those variable & fixed-rate Cash ISAs which will or will not accept transfers (scroll down for those that do).

Trying_to_be_good

She's talking a bit of rubbish.

The 'easiest' way to get a better rate is to transfer the exisiting ISA to someone who accepts ISA transfers.

The other, unofficially easiest, way for someone who isn't planning on using their annual ISA allowances for new money, is to draw out the money and put it into a new ISA 'subscription' as new money, using the current year's allowance.

If he hasn't paid ANY money into an ISA this year (interest doesn't count), he can pay in £3,600 up to 5 April (08/09 allowance), and a further £3,600 on 6 April (09/10 allowance).

He can draw out just the £3,600, maybe if it's a cheque ot needs to go through a current account so a few days for the sheque to clear, and do the first transaction whilst leaveing the balance in the old account until he does the same for the next year's allowance.

apt

Although it is not the highest rate in absolute terms the Halifax ISA direct reward might be suitable. The interest rate is fixed at 3% for one year. Also, unusually for a fixed rate account, you can withdraw money if necessary. You still get 3% as long as the balance does not go below £1,000 or you do not make more than 4 withdrawals.

littlemrtinkle

halifax reward isa 3 % fixed accepts transfers in. just go into branch with id and proof of address and fill out a isa transfer form, takes a max of 60 days to transfer

mr_fishbulb

Baldur wrote: »

Yes - as soon as funds are removed from a Cash ISA account, any interest earned by them becomes taxable.

Just to clarify; you only mean interest earnt from that point going forwards, not interest which was earnt whilst the money was in the ISA wrapper.

Baldur

mr_fishbulb wrote: »

Just to clarify; you only mean interest earnt from that point going forwards, not interest which was earnt whilst the money was in the ISA wrapper.

That's correct - interest earned while in the ISA wrapper is tax-free.