ISA - Self Transfer

psychic_teabag

Ignoring the old ISA... if this year's ISA is transferred to a new provider, it still counts as the same ISA, and so can continue to accept deposits. I clarified this myself in this post :
http://forums.moneysavingexpert.com/showpost.php?p=40400770&postcount=9
(I wonder if we should try to get Martin to add a note about that to the main ISA-transfer article..?)

The only risk near the end of the tax year is that deposits can't be made while it's in-transit, so if there's a hold-up, might miss the chance to top-up before the end of the year.

m0n3y_3

According to this article http://www.thisismoney.co.uk/savings-and-banking/article.html?in_article_id=490861&in_page_id=7 which links to the previously mentioned HMRC guide for Isa mangers, "The taxman has been turning a blind eye for years to those who break the rules on Isa transfers and subscriptions" as long as you only self-transfer once and stick within the ISA allowance for the year.

jamesd

calleyw, you're right that you can do what you have proposed and be within the ISA system rules.

However, the method you're using is supposed to be one for those who don't know the rules and do it by mistake. It's not supposed to be used as a matter of choice instead of using a transfer form. It still works, but HMRC would class it as abuse of the system. Best not to do it, using a transfer instead if you can, since HMRC doesn't have to keep this exception.

HMRC explains the self transfer rule. Note their clear description that you can't just take money out and redeposit it, but then they go on to describe an exception they make for self transfers.

Investor error - Self transfer
12.30 ISA investors must transfer their ISAs through the ISA manager. Investors cannot transfer an ISA by closing it and opening a new ISA with the new ISA manager
(commonly known as ‘self transfer’).
12.31 Blank
12.32 However, where
• the investor subscribes to two cash ISAs, in the same tax year, and
• subscriptions to the first ISA subscribed to were valid, and
• the first ISA subscribed to was closed (see paragraph 12.33) before subscriptions to the second ISA were made
the subscriptions to the second ISA may be valid (see paragraph 12.32a).

12.32a The first cash ISA to be self-transferred in tax year is valid, and need not be repaired.
The second (and any subsequent) self-transferred cash ISA is not valid and is not eligible for repair.
12.33 An cash ISA is closed for this purpose when all the funds held in the ISA are withdrawn (including any subscriptions for earlier years) and no further subscriptions are made to the ISA in the same tax year.

For Example

Mrs Cooper subscribes £3,000 to a cash ISA with Anybank plc on 20 April 2008. She closes it on 30 November 2008, then subscribes to a second cash ISA with Betterhomes Building Society on 3 December 2008. The subscriptions to the second cash ISA are valid.

On the same day Mrs Jones subscribes £3,000 to a cash ISA with Anybank plc. She closes it on 30 September 2008, then subscribes to a second cash ISA with Betterhomes Building Society on 3 November 2008. She closes it on 15 February 2009, then subscribes to a third cash ISA with Superiorhomes Building Society on 23 February 2009. The subscriptions to the Betterhomes Building Society cash ISA were valid, but the subscriptions to the Superiorhomes Building Society cash ISA are not valid and are not eligible for repair.

Mikeyorks

psychic_teabag wrote: »

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. .

The 'self transfer rules' don't cover this. It's simply that £1600 has already been contributed of the current year allowance. Leaving £3500 still available ....... additional to the sum of £300 'self transferred'.

As this original contribution has been clearly (the return made by the original ISA manager will reflect it) reduced by £1300 being 'taken out' prior to formal closure then you would be pushing your luck by attempting to re-instate the full £5100 as opposed to the net £3800?

Mikeyorks

agrinnall wrote: »

Is that right Mike? .

It is ........... covered by the paste from the HMRC guidance in post #14.