ISA query- can I start another?

Steerpike_2

Hi,

I have a cash ISA with Egg and have paid in nearly my full subscription for the tax year but have also withdrawn a lot, leaving me with only approx £300 and today it is telling me I can only top up by £200 odd.

Can someone advise, can I take out a new ISA tomorrow (it would be my second, and first in Tax year 09/10). I can then close the Egg one and transfer any funds (up to £3600) into the new one. Sorry to be dim - is this how it works?

Thanks

timarr

You're not dim, it's confusing.

The basic thing to remember is that each year you have an allowance which is the amount you can put in. If you take money out you can't put it back in - the allowance covers money invested once only.

So if you have £300 left in your ISA today it's that amount you can transfer to another ISA.

However, ISA's last forever. So you don't need to do anything with the current one to keep your £300. It's in an ISA and stays there until you take it out. As of tomorrow (April 6 2009) you have a new allowance of £3600 (cash ISA, equity ISA is £7200). So tomorrow you can start a new ISA with £3600 and your old ISA remains intact.

Normally if you start a new ISA with your existing provider it gets rolled up. So if you have £300 in your current ISA and you invest £3600 tomorrow with the same ISA provider you will have one ISA worth £3900.If you invest the new ISA with a different provider you'll have 2 ISA's - one worth £300 and one worth £3600.

It's all a bit confusing, but just remember you can only invest up to £3600 in a single tax year and if you take money out you can't put it back. This is because of the tax relief on ISA's which is a one off offer, you can only use it once.

Note that you can split the max ISA allowance £7200 50/50 between cash and shares but can have no more than £3600 in cash (which sounds like what you're doing). See: http://www.moneysavingexpert.com/savings/ISA-guide-savings-without-tax

timarr

Baldur

Steerpike wrote: »

Can someone advise, can I take out a new ISA tomorrow (it would be my second, and first in Tax year 09/10).

Yes you can.

I can then close the Egg one and transfer any funds (up to £3600) into the new one.

You don't need to close the Egg one - you can simply select a new provider that accepts transfers and complete their transfer form. They will then arrange for your Egg ISA to be transferred to them and you can add your full £3,600 2009/10 ISA allowance from tomorrow onwards.

Steerpike_2

thank you both for taking the time to reply - very much appreciated.