ISA - Self Transfer

calleyw

I have a very quick question.(oops did not see the board for ISA doh.)

If I have subscribed to a cash ISA this year 2010-2011. And it has very little money in it.

Can I shut the ISA down and then open a new ISA with transfered funds from an old ISA (last payment made in tax year 2009-2010 and over the limit to self transfer).

I know that I can do a self transfer which means shutting the current ISA down and opening a new one. With the cash from the old one.

But I can do it the way I describe in the 3rd pargraph. As I was told on the phone today by call center staff that I now can't open a new ISA for this tax year. Which I know is not strictly true. Or do I just wait for the new tax year and miss out on a couple months of interest.

Thanks in advance.

Yours

Calley

psychic_teabag

Is there any reason you don't want to just do it the official way - by asking the new provider to perform the transfer on your behalf ? Ah, perhaps the account you've chosen doesn't allow transfers in ?

It might help if you can specify which providers are involved. I have heard that Halifax are a bit weird in that, even if you just want to transfer an old account, they require that you open and fund a new ISA with them first, which you're not allowed to do. Perhaps it's their way of imposing a loophole that you can only transfer to them if you also use this year's allowance with them.

shrewsaver

Open a new ISA with a new provider and request a cash isa transfer form, complete the details on this form of your current isa and hand it back to your new provider.

Under no circumstances do you close your current isa as you will loose the isa status of this money and the money that would have been in it will be counted as new money rather than still be counted as previous years allowances.

It would be worth speaking with your new provider so they can guide you through with what to do, why not take your current isa details with you when you open the new isa and they may fill it all in for you.

Hope this helps.

rb10

psychic_teabag wrote: »

I have heard that Halifax are a bit weird in that, even if you just want to transfer an old account, they require that you open and fund a new ISA with them first, which you're not allowed to do.

This is incorrect.

There is no requirement to fund any Halifax ISA with 'new money'. A transfer in from an existing ISA is perfectly acceptable.

xrjtg

The confusion is with their online application form, which I believe asks you to certify that you have not subscribed to a Cash ISA in the current year, even if all you want to do is transfer.

calleyw

Sorry I think I have confused people.

I really don't want to go in to the history of how it happened or why but it just complicated.

The current ISA was opened in 2010-2011 tax year only £1600 was put in and then £1300 taken out. I view ISA as long term savings. (by the way it is not me who made this mess up in the first place. I am trying to sort it out for them.)

Now the current ISA is not a good interest rate and hardly worth keeping. So not worth transferring the £300 as there is another cash ISA from 2009-2010 with a lot more that I want to transfer to a new ISA with the same people (who hold the 2009-2010 ISA)

So I don't see the point of transferring back £300.

I also really don't under stand the bit about the offical way. It is perfectly ok to self transfer once. To open two ISAs in one tax year as long as the first one is shut down. It does not breech the ISA rules. I am also well aware that I loose the tax free status. The HMRC don't have an issue with it and well aware of it. Article here.

All I wanted to know was if I self transfer my ISA can I still transfer in from another cash ISA.

Please note I use the first person just to make it easier. Also I wanted to be sure of myself before I went in to sort the whole thing out.

As the current ISA holder has told me incorrectly that I can't open a new ISA for this tax year if I shut this one.

Yours

Calley

rb10

calleyw wrote: »

I also really don't under stand the bit about the offical way. It is perfectly ok to self transfer once. To open two ISAs in one tax year as long as the first one is shut down. It does not breech the ISA rules. I am also well aware that I loose the tax free status. The HMRC don't have an issue with it and well aware of it. Article here.

Self-transferring ISAs is a bit of a grey area. The article that you have found seems to (in my opinion) simplify it far too much, as it's not as simple as you describe.

The actual HMRC ISA Guidelines say:

HMRC wrote:

12.30 [...] Investors cannot transfer an ISA by closing it and opening a new ISA with the new ISA manager (commonly known as ‘self transfer’).

... before going on to describe how to actually carry out a 'self transfer'. A complete contradiction.

I would steer clear of self-transfers if it was me.

The actual ISA transfer procedure is very simple:

1) Open a new ISA
2) Ask that provider for two ISA Transfer Forms
3) Fill them in (one with the details of the ISA from 2009/10, and the other with the ISA from 2010/11)
3) Wait for the letter confirming that the ISAs have been transferred.

This is far easier, there's less room for error, and no chance that you'll be in trouble for breaking the rules.

It is by no means as black and white as 'it is perfectly ok to self transfer once'.

psychic_teabag

See also http://www.moneysavingexpert.com/savings/cash-isa-transfers

The only reason I can think of to be attempting the self-transfer route is if the new ISA you have chosen does not allow transfers-in. (Or you just like making things complicated).

It may be that doing a self transfer of this year's ISA allowance would allow you to erase the history (the fact that £1300 went in and came out), and so pay in a full year's allowance. But I really wouldn't know about that. But at least if you transfer last year's ISA the proper way, you leave the door open to attempt to do a self-transfer later (if you believe you are allowed one self-transfer per year).

(Based on that article, another way to erase the history of the cash ISA might be to transfer it to a S&S ISA, then just withdraw the money without investing it, and then you are free to open another cash ISA this year. Dunno...)

Mikeyorks

calleyw wrote: »

Now the current ISA is not a good interest rate and hardly worth keeping. So not worth transferring the £300 as there is another cash ISA from 2009-2010 with a lot more that I want to transfer to a new ISA with the same people (who hold the 2009-2010 ISA)

So I don't see the point of transferring back £300.

If I'm reading this correctly ..... you want to do an internal transfer of the old year ISA (09/10) to a better rate. And then close the ISA that's been contributed to (only) in this tax year ..... and add the balance of £300 to the old year ISA you've just transferred?

If that's correct - then yes, you can do that under the 'self transfer rules'. And - as well as the £300 - you can also add the remaining balance (£3500?) of the allowance if you wish.

For avoidance of any doubt with HMRC I would do the transfer first. Then fully close the redundant ISA .... before adding the extra funds to the transferred one.

psychic_teabag

Mikeyorks wrote: »

If that's correct - then yes, you can do that under the 'self transfer rules'. And - as well as the £300 - you can also add the remaining balance (£3500?) of the allowance if you wish.

Out of mild curiosity, what aspect of the self-transfer rule means that you can only transfer the remaining balance (£3500) rather than paying in the full year's allowance. Is it only the final closing balance of the original ISA that can be self-transferred ?

Eg suppose I open an ISA, pay in £1600, then decide to do a self-transfer of all £1600. Do I have to withdraw £1600 all in one go, or can I withdraw £1300 one day, and £300 the next ? And if that's okay, what if I withdraw the first £1300 a week before closing ? I'm sure you see where this is going : what's the stop the OP claiming that the withdrawal of the £1300 was all part of the self-transfer that they planned to do all along ?

Perhaps it's not how you withdraw the old money, but how you open the new ISA : if the opening deposit is only £300, the £1300 is lost, but if the opening deposit is £1600 it can be claimed to have been a self-transfer of the full £1600 that had been deposited originally, even though some of it was withdrawn much earlier.

Anyway, for me it's just academic interest.

agrinnall

Mikeyorks wrote: »

For avoidance of any doubt with HMRC I would do the transfer first. Then fully close the redundant ISA .... before adding the extra funds to the transferred one.

Is that right Mike? I thought you could only only deposit new cash into a single ISA in each tax year, so to get both the 09/10 and 10/11 ISA cash into a new 10/11 ISA it would have to be by transfer in both cases and the £3500 would have to be deposited into the old 10/11 ISA before it is transferred to the new one.