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Implications of closing an ISA

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I know we are told never to close an ISA but what are the implications if you do. I have roughly £8k sitting in an ISA paying 1.10%, money that I don't need to touch and I can earn over 4% gross on a fixed rate normal savings account so nett that is going to earn me much more than the ISA is paying. How will I lose out if I close the ISA?

Comments

  • KingL
    KingL Posts: 1,713 Forumite
    It's a long term thing. In 5 years when you're paying 55% income tax, you might wish you had held onto your tax protected savings.

    You can transfer your existing ISA into another one that is paying a much better rate. You just have to keep transferring it around to keep pace with the current better paying ISA accounts.
  • molerat
    molerat Posts: 34,528 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    If you pay tax then you will only be able to get the interest net on the new account and the money withdrawn will not be able to go back into a tax free environment. You can get up to about 4.5% in an ISA at the moment http://forums.moneysavingexpert.com/showthread.html?t=401374
  • Thanks for that, but as I have used up this years allowance, am I still allowed to transfer this money to another ISA or do I have to wait until April 2010?
  • KingL
    KingL Posts: 1,713 Forumite
    You can transfer at any time. (unless your specific ISA has restrictions as part of it's terms and conditions)

    Make sure you use the transfer process (ask the new provider to arrange it) - don't just take the cash out manually.
  • Gambler
    Gambler Posts: 3,283 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    I closed my ISA a few months back after about 10 years of contributions and placed it in my First Direct offset. Am about £900 p.a. better off.
  • Great! I will get on to it straight away. Thanks a lot
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