Multiple ISA's from old and current tax years.

magictom123

Hi there,

I have searched here and can't find an answer to my particular question so I am hoping someone can help.

I have an ISA from a previous year with Barclays which I have been using to add money to this tax year (I realise they effectively close and re-open your isa as the tax year changes).

However, I have noticed now my 12 month introductory bonus rate period with the old isa has ended and the interest rate plummeted. Seeing that barclays have a new Isa for this current year - the Golden ISA - I have opened it up and put £1 in.

Now, here's the tricky bit.

The golden isa does not allow transfers in. I have online banking. I was thinking of withdrawing money from the old isa to my current account and immediately putting it into the golden isa. There is nothing stopping me doing this because it can all be done through online banking in seconds.

Now a few things confuse me. There's always a big fuss on withdrawing money from isa's instead of doing transfers because you lose the tax relief. However, in this case there would be no alternative as the Golden Isa does not allow transfers in from other ISA's, also would the loss of tax relief really matter if the money is immediately going into another ISA account?

Secondly, I read somewhere on the web that if such an action was completed you would lose the tax relief on the new ISA? I find this confusing as it was poorly explained and didnt cover my exact situation. Does this mean that even though the money would be sat in the golden ISA that come April, tax would be taken from it.

So, in conclusion, is it possible from the ISA rules perspective to take money from an ISA opened in a previous tax year that I've added to this year and withdraw it and redeposit it into a new ISA that I have just opened.

Thanks for your answers in advance.

Baldur

As you say that you have "been using to add money to this tax year" to the original ISA, your 'Golden' ISA application is void - you have subscribed to two Cash ISAs in the same tax year; so the rest of your questions are irrelevant.

What you should do is contact the ISA helpline, who will probably tell you to close the void 'Golden' ISA, then find a new ISA provider that accepts ISA transfers and complete their ISA transfer form to transfer the 'old' Barclays ISA to them - you can then, legitimately, top up any balance of the current tax year's allowance remaining.

ISA Helpline:

If you have any questions about the tax rules for ISAs:

visit our website at: Individual Savings Account (ISAs)

call our ISA Helpline on Tel 0845 604 1701 (Monday - Friday, 8.30 am - 5.00 pm).
Please have the information about your ISA available when you call.

magictom123

Thanks for the quick reply. Given your info I think I will keep my money where it is and switch to a new one in the new tax year. Given the history of people's transfer's being delayed, and the fact I need access to my money, that will the best course of action.

Out of interest, what would happen if I did just withdraw and redeposit into the new ISA. Would any interest be lost for the remainder of the year or some sort of penalty imposed. I am just curious.

Thanks again.

Baldur

magictom123 wrote: »

Thanks for the quick reply. Given your info I think I will keep my money where it is and switch to a new one in the new tax year. Given the history of people's transferred being delayed, and the fact I need access to my money, that will the best course of action.

Out of interest, what would happen if I did just withdraw and redeposit into the new ISA. Would any interest be lost for the remainder of the year or some sort of enalty imposed. I am just curious.

You don't have a new ISA - it's void!

The error will be picked by via HMRC audit against your National Insurance Number - it's far better for you to contact the helpline, as suggested, than waiting for them to contact you..

magictom123

rightyo, as I said I am just curious and won't be depositing any money into the new void ISA. However, regarding ISA's, my uncle deposited more than 3.6k a few years back and the only thing that happened was that he got a letter from the HMRC saying don't do it again.

Anyway, thanks again.

patman99

When the new tax year is here, look to see who has the best interest rate on their ISA, and withdraw all your cash (or £3500 if you have more than this in your current ISA), and use it as the opening deposit in your new one. You can have more than 1 ISA open at a time, but you must only deposit into one of them. So if you have reached the limit on your new one, you CAN'T put money into any of your other ones.