ISA - confused

System

This document is not directly from the HMRC website, but it is an official document (AFAIK)

See page 42 (Section 21 - 4C) : 39_ISARegs_2011A.pdf

I think that confirms you can transfer current years subscriptions and then continue to subscribe into the new ISA account (up to the annual limit)

jem16

nearlyretired2004 wrote: »

Whilst it is true that you can transfer an ISA to a new provider at any time, as far as I'm aware you can only contribute to one provider in any tax year

I think the confusion comes from your use of provider. If that was true you could not hold a cash ISA with the Halifax and a S&S ISA with Hargreaves Lansdown which of course you can.

The actual rules (from HMRC http://www.hmrc.gov.uk/isa/isa-guidance-notes-2008.pdf) are;

The “one-ISA-of each-type-a-tax-year” rule
3.14 In each tax year, ISA investors may subscribe to
• one cash ISA and
• one stocks and shares ISA

As BAA1 says HMRC muddy the waters by giving examples for Cash ISA transfers of current year's subscriptions to S&S ISAs where most people would find it helpful to have rules for Cash ISA to cash ISA.

Basically, however, if you have a Cash ISA for the current tax year and wish to transfer it, you must do so in its entirety and that account is closed. You cannot transfer part of it as you can with previosu years' subscriptions. This then menas that the cash ISA is still the only one that is being subscribed to - the fact that it is with a different manager does not matter as under the rules you still only have one Cash ISA for that tax year.

HMRC provide a form so that the old manager can tell the new manager how much has been subscribed this tax year. If no further payments could be made after transfer there would be no need for this form.

http://www.hmrc.gov.uk/isa/cash-xfer-form.pdf

I agree though that it is an area where HMRC need to make it clearer for Cash ISA to Cash ISA transfers.

System

I have just completed an HMRC feedback form on their website to ask them to provide a better example of a Cash ISA to Cash ISA transfer with current year subscriptions.

Lets see if they take any notice :)

Rob_192

BAA & jem

Thanks for your further comments.

BAA, I would be really intersted to know what response you get from HMRC, please keep us posted. In the meantime, I think I'll refrain from doing the transfer in this way and err on the side of caution.

R

Baldur

Rob_192 wrote: »

BAA & jem

Thanks for your further comments.

BAA, I would be really intersted to know what response you get from HMRC, please keep us posted. In the meantime, I think I'll refrain from doing the transfer in this way and err on the side of caution.

The posts by jem16 & BAA1 are quite correct, there is no prohibition regarding ongoing subscriptions to a transferred current tax year's Cash ISA.

You can easily confirm this by a call to the HMRC ISA Helpline.

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

• visit our website at: https://www.hmrc.gov.uk/isa

• call our ISA Helpline on Tel 0845 604 1701 (8.30 am to 5.00 pm, Monday to Friday).

System

Rob_192 wrote: »

BAA & jem

Thanks for your further comments.

BAA, I would be really intersted to know what response you get from HMRC, please keep us posted. In the meantime, I think I'll refrain from doing the transfer in this way and err on the side of caution.

R

Unfortunately, HMRC do not respond directly to individuals who complete a feedback form. We / I will just have to keep an eye out for a better example on the web site, if one appears.

But as Baldur suggests, if you are still in doubt, speak to HMRC, you should not put off transferring funds, as an MSE member you must make best use of your money :cool::)

Rob_192

BAA1 wrote: »

Unfortunately, HMRC do not respond directly to individuals who complete a feedback form. We / I will just have to keep an eye out for a better example on the web site, if one appears.

Thanks again BAA

But as Baldur suggests, if you are still in doubt, speak to HMRC, you should not put off transferring funds, as an MSE member you must make best use of your money :cool::)

No fear there BAA, it's actually quite marginal. I would only gain a small amount. Most of our Isa deposits (about 5 years worth) have been transfered to 3 year deals, currently earning between 4.40% and 4.25%. I'm not even sure if I'm going to put any more in this year's cash Isa, might just put it all in S&S instead.

t0rt0ise

Why don't you call the bank or whatever and ask them? I'd tend to call the new provider but the current one would be able to answer too.

jem16

t0rt0ise wrote: »

Why don't you call the bank or whatever and ask them? I'd tend to call the new provider but the current one would be able to answer too.

You're much more likely to get the wrong answer from the bank from someone who hasn't a clue what they are talking about.

pqrdef

Rob_192 wrote: »

I had always thought it a fundamental principle that you could only make contributions to one provider per year.

But another fundamental principle is that when you do an ISA transfer, everything carries on as if you'd been with the new provider from the start.

The old provider passes all relevant info to the new provider and tax-wise may then forget you ever existed. You won't appear in his year-end return to the taxman.

The new provider will initialise the account for tax purposes as if the transferred contributions had been made directly to that account, and will notify the taxman on that basis. The taxman doesn't need to know that any transfer ever occurred.

So your principle is correct, but subject to the understanding that transferred contributions are transferred in every sense - they have become contributions to the new provider.


Note that when you instigate a transfer of current-year contributions, you should wait until notified that the transfer is completed before doing anything else. There can be a breach if you pay money into the new account too soon.