bit of ISA transfer trouble

sunnybox

Hi,

I had a cash ISA in the previous tax year and thinking about to get this year's allowance as well.

Now I have heared about ISA transfer although it is not clear how I could make use of it. Every [cash] ISA seems to have namely a limit of approx. 5340 pounds, so then if I transfer my ISA to another bank that was also 5340 pounds I have then no more room for new money for this tax year.

I have thought that with an ISA transfer I could add new money to the already available amount. So that if I had the old ISA transferred and put the new money in up to the limit I would have 2X5340 pounds in cash ISA in this tax year.

Am I misunderstanding this ISA transfer then or is it really possible like I think?

Thanks.

Lokolo

What ISAs are you seeing that only allow £5,340? Some only allow new deposits, so won't accept transfers in.

jem16

sunnybox wrote: »

Every [cash] ISA seems to have namely a limit of approx. 5340 pounds,

Every cash ISA would probably say that as that is the allowance for this year.

I have thought that with an ISA transfer I could add new money to the already available amount. So that if I had the old ISA transferred and put the new money in up to the limit I would have 2X5340 pounds in cash ISA in this tax year.

That's correct. However do be aware that not all cash ISAs accept a transfer.

nearlyretired2004

Its very simple .....

This year everyone has an ISA allowance of £5340 (this amount can vary from year to year). Call this 'new money'

This can either be deposited into an existing ISA or used to fund a new ISA.

ONLY ONE ISA CAN BE FUNDED EACH TAX YEAR If you start to fund an ISA with even a pound, that is the only one you can pay New Money into in that tax year (although you can have many ISA's from previous years at the same time)

Previous years ISA's ('old money') can be transferred as often as you like, either all into one ISA or seperately, the only restriction is that the terms and conditions of some ISA's may only accept new money, so you need to find one that accepts 'transfers in'.

To preserve the tax free status of the money, you MUST use the ISA transfer process. Complete a transfer form from the NEW provider and return it to them - they will arrange for the funds to be transferred.

Maybe an example (my actual ISA holdings ) will help .....


In March 2010 the best rate I could find was M&S fixed for three years at 4% - I had not yet funded an ISA for 2009-2010 so I added that years allowance to an existing ISA then transferred it and ALL my previous ISA's into M&S

In April 2010 (New tax year,new allowance of £5100) I funded a Santander (Instant access) ISA at 3.2% with the whole amount

In April 2011(New Tax year, new allowance of £5340) I funded a Santander loyalty Instant access at 3.5% with the whole amount - but this account doesnt accept transfers in, so I couldn't transfer last years ISA to get the higher rate.

So, I currently hold three ISA's - M&S (with just under two years remaining of the fixed rate) containing most of my ISA money, Santander at 3.2% with last years money and Santander at 3.5% with this years money.

Hope this isn't too long but I've tried to make it clear.

xrjtg

nearlyretired2004 wrote: »

ONLY ONE ISA CAN BE FUNDED EACH TAX YEAR If you start to fund an ISA with even a pound, that is the only one you can pay New Money into in that tax year

(You can also move your current year's ISA around, and pay into it before and after the move, but please ignore this parenthetical comment if you're aiming for a basic understanding!)

The_Enforcer

nearlyretired2004 wrote: »

Its very simple .....
In April 2010 (New tax year,new allowance of £5100) I funded a Santander (Instant access) ISA at 3.2% with the whole amount

So, I currently hold three ISA's - M&S (with just under two years remaining of the fixed rate) containing most of my ISA money, Santander at 3.2% with last years money and Santander at 3.5% with this years money.

The rate of the 3.2% ISA will have dropped to 0.5% now, so you could transfer that one to a higher rate instant/notice/fixed rate deal.

As for this year's ISA, the way I remember it is "only one ISA containing 2011/12 subscription at any one time."

nearlyretired2004

.....err, I already thought my post was getting too long so didn't want to complicate things further ......

My interest rate would indeed drop, but on 13 July (my mistake - sorry ! I know I said I funded it in April that year - it was later!)

So a transfer was initiated on 1st July and completed yesterday to Halifax at 3.2% (and using Halifax's ISA promise I got interest from both providers during the transfer process!)

(by the way, the site wont let me 'thank' you - says I dont have permissions!)

Ediit: Ah - I see my thanks are there - dont know what the error message was about then .......