Transfer cash ISA to stocks and shares ISA

david78

I'm trying to remember what the rules are on this.

Say tax next year I pay £5340 into a cash ISA and nothing into a stocks and shares ISA.

Later in the same tax year, I decide to transfer the cash ISA (plus interest accrued) to a stocks and shares ISA.

As far as I remember:

(1) The transfer to the stocks and shares ISA uses up my stocks and shares ISA allowance.

(2) After the transfer, I get a second, fresh new cash ISA allowance that I can use to open another cash ISA next year, and I can open this with anyone I like.

Can anyone confirm my understanding?

Lokolo_2

Absolutely correct, I've looked up the rules in relation to what you said above and It's fine to do as you stated:

HMRC wrote:

Where current year subscriptions are being transferred from a cash ISA to a stocks and shares ISA, the current year subscriptions 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 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.

psychic_teabag

Does (1) "use up" the S&S allowance ? I'd have thought at that point you still have £5,340 allowance remaining, and you can choose to put it into the S&S ISA or a cash ISA.

If so, perhaps (1) would be more accurate as "counts towards" S&S ISA allowance, rather than "uses up".

It sounds like this could be a ruse to move the contents of a cash ISA to a another provider that doesn't allow transfers :
transfer it to a S&S ISA
withdraw it all as cash (without having invested in anything)
use the cash to open a new cash ISA