ISAs: Frequently Asked Questions (FAQs)

jamesd

rb10 wrote: »

d. ... I have used up my whole allowance for 2009/10
You cannot pay any new money into an ISA now. You will need to wait until 6th April. This means that you cannot now open accounts like the Santander/A&L Flexible ISA (which does not allow transfers in, and is only for new money).

It's entirely possible to pay more money into a cash ISA now, even without using the self-transfer rule in my last post.

You can do it in two steps:

1. Transfer the cash ISA into a stocks and shares ISA. You don't need to buy any investments, you can just take out the cash once the transfer has completed.
2. The transfer of cash ISA to S&S ISA resets your cash ISA subscription counter to zero for the tax year and you can use your cash ISA allowance again.
3. You are still subject to the overall limit of the ISA subscription, no more than 7200 or 10200 per year, counting both cash and S&S ISA subscriptions.

As with the self transfer rule, this is a new rule that was introduced in 2008. As the rules say:

11.2 Subscriptions to a stocks and shares ISA can only be transferred to another stocks and shares ISA.
However, subscriptions to a cash ISA can be transferred to another cash ISA, or to a stocks and shares ISA.

11.12a Where current year subscriptions are being transferred from a cash ISA to a stocks and shares ISA, the current year subscriptions
• are transferred in whole (including any related income), and
• are treated for all ISA purposes as if they had been made to the stocks and
shares ISA.
This means that the investor is regarded as never having subscribed to the cash ISA. Within the overall subscription limit, therefore, (see paragraph 6.1) the investor may subscribe to a cash ISA later in the current year (with the same or a different manager) without breaching the one–ISA-of-each-type-a-tax-year rule (see paragraph 3.14).
For Example
Mr Rosen subscribes
• £2,000 to a cash ISA with Manager A in May 2008, and
• £1,000 to a stocks and shares ISA with Manager B in June 2008.
The cash ISA with Manager A is credited with £20 interest in July 2008. In August 2008 he decides to transfer the current year subscriptions to his cash ISA from Manager A to Manager B. The whole £2,020 is transferred. And since the date of the first payment in to the cash ISA pre-dates the date of the first payment to the stocks and shares ISA, Manager B updates his records to show the date of the first payment in the current tax year as May 2008.
Mr Rosen is now regarded as having subscribed £3,000 to the stocks and shares ISA with Manager B and nothing to the cash ISA with Manager A.

rb10

Thank you for your useful posts jamesd.

jamesd wrote: »

This is a partially inaccurate claim for cash ISAs. You're permitted to withdraw all money from a cash ISA and pay it in to another cash ISA in the same tax year even without using a transfer form. You are permitted to do this only once per tax year. The only non-accidental case where this is useful is to pay into an account that doesn't accept transfers in. It's particularly useful at this time of year when new accounts that don't take transfers in can be introduced. [...]

A good point. I have linked to your post from the first post, rather than including it as a section in the first post. I have done this because it is something slightly technical that most people should probably steer clear of (as you need to have read and fully understood the rules), and because your post describes it very clearly.

jamesd wrote: »

It's entirely possible to pay more money into a cash ISA now, even without using the self-transfer rule in my last post.

You can do it in two steps:

1. Transfer the cash ISA into a stocks and shares ISA. You don't need to buy any investments, you can just take out the cash once the transfer has completed. [...]

As I stated in the first post, for reasons of simplicity, I would prefer that this thread just talks about Cash ISAs.

The vast majority of people are only interested in Cash ISAs, so we do not want them to get bogged down with discussions about S&S ISAs. That discussion would be better taking place elsewhere on the board.

jamesd

The S&S ISA is used in this case solely as a tool to get the money out of the cash ISA, so it can be used for a new subscription to a different cash ISA that only takes new money. It'll work even when the self-transfer described in the first post can't be used any more because it's already been done once.

jamesd

Also worth noting that HMRC's helpline prefers the via S&S ISA method.

Mickygg

Very useful thread here. I have been trying tofind out if I can open up an Isa now but pay into it after 6 April.
Interestingly I called a while ago santander and they said I could open up an isa for 10/11 now then pay in in April.
I wasn't convinced and based on this thread ill take it as you can't.
Cheers.

RayWolfe

Yes you can if the provider allows it. As long as no money is paid in until 6th April, the setting up of the account is just administration. It must, however, be set up as a 2010/11 ISA.

rb10

* Bump *
........

ljaneyr

I think I must be a bit dim because I have been reading up on this for a while and still find ISAs really confusing.

I opened my first ISA in Nov 09 and haven't used up the full 3600 yet. If I don't put in 3600 before 6 April has this years allowance ended and I then start paying into next years allowance?

Secondly, the introductory offer ends in Nov 2010, will I have to transfer the balance to a new ISA to continue paying in the 10/11 allowance (to an account with decent interest) or can I open a seperate account and begin paying the remainder of the years allowance into that one?

Sorry to ask questions which I'm sure have been answered elsewhere but I can't seem to get my head around it

Baldur

ljaneyr wrote: »

I opened my first ISA in Nov 09 and haven't used up the full 3600 yet. If I don't put in 3600 before 6 April has this years allowance ended and I then start paying into next years allowance?

Yes, that's correct

Secondly, the introductory offer ends in Nov 2010, will I have to transfer the balance to a new ISA to continue paying in the 10/11 allowance (to an account with decent interest) or can I open a seperate account and begin paying the remainder of the years allowance into that one?

You are likely to have to transfer in order to obtain a decent rate if it's an introductory bonus and, after transfer, could continue to subscribe any remaining balance of your 2010/11 allowance of up to £5,100.

If you pay any of your 2010/11 allowance into the present ISA on or after 6th Apeil, you cannot open and subscribe to a separate account with a different provider.

ljaneyr

Thank you! I think I understand now. I'm definitely going to get as much money as possible into this years ISA before 5th April, but I'm torn between opening an A&L ISA with a slightly higher interest rate (3.5% instead of 3%) after 6th Apr or continuing with the original ISA which I would then need to transfer into a new one in Nov. Is either one of these options much better or does it not really matter?

Sorry to ask so many questions!