ISA transfers

LynneK

Hi,
New to ISAs and doing my research. With regards to transferring ISAs the HMRC factsheet says...
"You cannot make this transfer yourself by closing the first ISA and paying the money into a new ISA"
What I don't understand is this. I buy an ISA April 2011 say for £5340. At 3% this will generate £160.20 tax free interest. At the end of the tax year I cash in the ISA, get my £5340 and the £160.20 which I pocket. I then buy another ISA with the £5340 at the beginning of the next tax year. OK so my savings haven't built up but I may have needed the £160.20. Am I missing something?
Lynnek

00ec25

read the guide to ISAs on the main site - brouwn tab at the top of this page labelled banking saving

there is further info on transfers here
http://www.moneysavingexpert.com/savings/cash-isa-transfers

edinburgher

Well, if you close your original ISA and withdraw the funds, these will be sitting in your current account/other savings account and you'll be taxed on them.

Alternatively, you could transfer the £5340 ISA into a new ISA and then withdraw the interest if required. This means your money will remain protected from tax, whereas it won't be the moment you take it out of the ISA. Also remember that you get a new ISA allowance each year, so if you don't need to spend previous years ISAs, it's a great way to build up a tax free pot for the future.

Edit: On the theme of having a new allowance each year - if you close your ISA each year and then pay it in to next year's ISA, you greatly reduce the amount you can save, as you won't have room to pay in new monies.

Aegis

LynneK wrote: »

Hi,
New to ISAs and doing my research. With regards to transferring ISAs the HMRC factsheet says...
"You cannot make this transfer yourself by closing the first ISA and paying the money into a new ISA"
What I don't understand is this. I buy an ISA April 2011 say for £5340. At 3% this will generate £160.20 tax free interest. At the end of the tax year I cash in the ISA, get my £5340 and the £160.20 which I pocket. I then buy another ISA with the £5340 at the beginning of the next tax year. OK so my savings haven't built up but I may have needed the £160.20. Am I missing something?
Lynnek

Most people don't cash in their ISAs at the end of each year, the roll them over and ideally pay more in when the allowance resets.