Transferring ISA mid-year?

dreamdreamer

Hi all,

Wondering if you can answer a question. As of August I'll be debt free and paying £500-£750 a month into savings instead of to creditors (woo!). The plan is to pay this all into an ISA from August- April to try and fill my 2011-2012 allowance and then next financial year split the money between £300 into the First Direct RS (already bank with them) and my ISA allowance.

I've just about got my head around ISAs but one thing is confusing me. If I open an ISA in August, can I wait until August 2012 to transfer it (to make the most of the 12 mth decent APR) and then move to another provider even if I've added funds (but not to limit) in the 2012-2013 tax year?

I'm a little confused as I know you can only pay into one ISA per tax year but I'm unclear about whether you can transfer it mid-year and continue funding it. I had a quick forum search but couldn't find much!

Thanks in advance,

Dreamer x

Stochasticity

dreamdreamer wrote: »

I've just about got my head around ISAs but one thing is confusing me. If I open an ISA in August, can I wait until August 2012 to transfer it (to make the most of the 12 mth decent APR) and then move to another provider even if I've added funds (but not to limit) in the 2012-2013 tax year?

I'm a little confused as I know you can only pay into one ISA per tax year but I'm unclear about whether you can transfer it mid-year and continue funding it. I had a quick forum search but couldn't find much!

You can transfer at any time (so August 2012 if you prefer), subject to the specific terms and conditions of your chosen ISA.

If you transfer the ISA to which you have made your contributions in a given tax year, you have to transfer all of the contributions made in that tax year.

Suppose you have contributed £2000 in 2012/13 by next August, you have to transfer at least that amount (for convenience's sake, it's normally easiest to transfer the whole balance, and some providers won't allow you to do partial transfers in any case).

Once that transfer is complete, you can continue contributing to your new ISA until your total contributions for the tax year reach the contribution limit. In the above example, you would be able to contribute a further £3340, assuming a £5340 overall limit (the ISA allowance is indexed to RPI though, so should actually increase from £5340 to a higher figure next year).

thenudeone

You can only FUND one ISA in one tax year, up to the maximum allowance.
Whether you are allowed to add to the account after your initial investment depends on the specific account - some are like bonds and don't allow additional investments. But the investment will always come out of the tax year in which it was made, not the tax year that the account was opened in.

You can transfer an ISA at any time in part or in full if both account terms allow it, but if you want to transfer the current year's allowance you must transfer all of the current year's allowance to one provider - it can't be split. This is so that the new provide knows exactly what you have subscribed, and can allow you to use the remaining allowance.

Things to watch out for-
1) If you invest some of the allowance in a fixed bond-type ISA which the provider then closes to new money, you may not be able to use the rest of your allowance and you can't transfer your ISA it to another provider to use it either (because it is a fixed-term account), so your allowance is lost.
2) If you start a regular savings ISA in any month other than April, you may be forced to make 12 payments which will force you to use the following year's allowance with that provider. You may be able to transfer the account then, but you can't open and fund a new ISA with new money, which is where the best rates usually are.


Once the tax year has ended you can transfer the balances out to as many other ISAs as you wish - perhaps some instant access, one fixed rate with no access.

dreamdreamer

Thank you both for your superb answers. I did not know that about the 12 payments on some accounts either so I'll keep an eye out for that just in case I do want to move in April (which I may if base rates rise and give better APRs).

You may be able to transfer the account then, but you can't open and fund a new ISA with new money, which is where the best rates usually are.

So if I wait until August I'm limited to accounts that allow transfers in, even if only transferring the current years contributions? I didn't think of that, though it seems obvious now you've said it. In that case I might be better just to open a new one in April for my 2012-2013 contributions, and transfer my 2011-2012 contributions in August to a transfer-in allowing provider (I'll also have more reign to lock it in if I have the 2012-2013 accessible). I'll have to do some sums closer to the time with the APRs available.

Thank you both again!

ses6jwg

when customers set up regular payments into ISAs, I usually reccomend that they end on 1st of April before the new tax year starts, and that they pop into branch to review their options, as many of the best ISA rates are reserved for "new ISA money only"

xrjtg

ses6jwg wrote: »

I usually reccomend that they end on 1st of April before the new tax year starts"

It's probably worth mentioning that there is the possibility of being fouled up by weekends/bank holidays if you have automatic payments set up close to the start of the next tax year.

dreamdreamer

I'll be transferring manually into the ISA as the amount will vary with overtime but I'll be sure to get it in before the deadline, thanks.

mutter

I'm also trying to get my head round ISAs!
I'd like to open one for each of my (adult) children, putting in the maximum amount on opening.
I suspect they will both want to withdraw some of the money during the coming year, but what i'm not clear on is - if one took out say, £1,000, would they not be able to replace that at some stage?

Then - what happens after a year?
Would the ISA revert to a normal taxpaying savings account? Is that why people cause long queues in banks at the beginning of April?

I know I'm dense, but I've read Martin's 'idiot's guide' and I'm still not clear on everything.

dreamdreamer

You can only deposit £5340 a year so if you deposit the full amount your kids cant add funds even if they withdraw. They'd surely have to be the ones opening/funding the accounts though as it's their tax allowances?

After a year the ISA remains tax-free but the interest often drop to a pitiful rate so a lot of people transfer at the end of the year.

oldfella

You can only FUND one ISA in one tax year, up to the maximum allowance.

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not strictly true - you can only have one current year ISA open at the same time. If you transfer a current year ISA, you can then continue to fund it up to the maximum at your new provider

mutter

dreamdreamer wrote: »

They'd surely have to be the ones opening/funding the accounts though as it's their tax allowances?

So I wouldn't be able to do it?
I want to give them around £5,000 each from their grandmother's estate and thought I'd be doing them a favour by putting it in an ISA rather than giving them a cheque.
If I go down the latter route, I can imagine it will languish in a current account for eons till they 'get round to' opening one for themselves.