ISA Rule Clarification Request

The_Snook

Hi,

I'd be grateful if someone could clear up the rules regarding ISAs as the information i've read from various sources is vague and ambiguous and i'm struggling to formulate a definitive answer. Here's my situation:

I transferred my Barclays ISA to a Santander Direct ISA last October and the interest on that was paid on the March 2nd. I now want to put it into a Santander Flexible ISA that pays a higher rate of interest but i'm not sure whether that is permitted because the rules of the ISA state that:
Allows you to put in your annual ISA allowance, but does not accept transfers in from any existing cash ISAs.

If I withdraw the balance on my Direct ISA account to my Santander savings account and then opened the Flexible ISA and deposited my annual allowance is that classed as a 'transfer'? I'm not sure it does because I haven't used my annual allowance for FY 11-12. On my Direct ISA account it states that the contributions to date are £0 and the contributions remaining are £5340. I'm assuming that a transfer is classed as using up your annual allowance and then part way through the financial year transferring it to another provider. Is this correct? My head's mashed.

Thanks in advance,

Snook

NB - I originally posted this in the wrong forum so i've asked the mods to delete the original.

Baldur

You can't transfer into the Flexible ISA as it only accepts new money for the 2011/12 tax year.

You can withdraw the balance from your Direct ISA and pay it into the Flexible ISA if you wish, if you don't expect to have the funds available or don't intend to use your full Cash ISA allowance for 2011/12.

ISA transfers can be carried out at any time to any provider/account that accepts them (the Flexible ISA does not), the tax year is irrelevant other than if the ISA contains any current tax year's funds, those must be transferred whole while previous tax year's/years' funds can be partially transferred.

Funkyfreddy

The_Snook wrote: »

Hi,

I'd be grateful if someone could clear up the rules regarding ISAs as the information i've read from various sources is vague and ambiguous and i'm struggling to formulate a definitive answer. Here's my situation:

I transferred my Barclays ISA to a Santander Direct ISA last October and the interest on that was paid on the March 2nd. I now want to put it into a Santander Flexible ISA that pays a higher rate of interest but i'm not sure whether that is permitted because the rules of the ISA state that:
Allows you to put in your annual ISA allowance, but does not accept transfers in from any existing cash ISAs.

The flexibale ISA does not allow ransfers in. If you want to transfer the balance and accured intreest of your Direct ISA you need to find a product that accepts transfers in.

The_Snook wrote: »

If I withdraw the balance on my Direct ISA account to my Santander savings account and then opened the Flexible ISA and deposited my annual allowance is that classed as a 'transfer'?

No it doesn't.

By withdrawing the funds from your Direct ISA you are removing them from their ISA "Wrapper". Any deposit you make into the Flexible ISA will be to the maximum of this years allowance of £5,340

If you want to transfer follow the transfer process initiated with the provider you choose to transfer to although if the balance is quite low and you know you will not make full use of the current tax year allowance a withdrawal and deposit may suit your personal circumstances.

The_Snook wrote: »

I'm not sure it does because I haven't used my annual allowance for FY 11-12. On my Direct ISA account it states that the contributions to date are £0 and the contributions remaining are £5340. I'm assuming that a transfer is classed as using up your annual allowance and then part way through the financial year transferring it to another provider. Is this correct? My head's mashed.

You haven't added any new funds ths tax year to your Direct ISA so you still have this years allowance of £5,340 to deposit in that or if you wish a completely different ISA you may wish to open.

FF