Cash ISA Rules Query

chaotic_j

Hi all,

Just wondering if I could ask for assistance with a cash ISA rules query please. I think that the answer to this is "yes" but I wanted to confirm it here first before carrying out any kind of further action.

I have built up a cash ISA over the course of several years adding full allowance and having interest paid directly back into the cash ISA. Always transferring to get a better rate each year.

Lately I have not been able to afford to top up my cash ISA. Anyway I digress.

My instant access cash ISA with Bank A has recently dropped from 3.00% gross to 0.50% gross. I will call this cash ISA 1. I was told I can redesignate with Bank A to a different instant access cash ISA product at 2.60% gross, lets call this cash ISA 2.

When I telephoned to do this I was told by Bank A that I would have to open the new cash ISA 2 product first, and then fill out a transfer form to transfer the balance of cash ISA 1.

Everything will then be contained in cash ISA 2.

I opened cash ISA 2 with a deposit of £340, this is the only deposit I have made into any cash ISA this current tax year (2011-2012).

In the meantime I have seen a better rate of interest with Bank B and their cash ISA 3 at 3.07% gross.

My question is, can I transfer cash ISA 2 into cash ISA 3 even though I only recently opened and funded cash ISA 2? Will I then still have the option of paying the remainder of my ISA allowance into cash ISA 3 this year?

Would it only be against the cash ISA rules, if I was to say having opened and deposited into cash ISA 2 then go along and try to open cash ISA 3 and also deposit into it (keeping cash ISA 2 open)?

Thank you in advance..

david78

chaotic_j wrote: »

Hi all,

Just wondering if I could ask for assistance with a cash ISA rules query please. I think that the answer to this is "yes" but I wanted to confirm it here first before carrying out any kind of further action.

Of course.

chaotic_j wrote: »

I have built up a cash ISA over the course of several years adding full allowance and having interest paid directly back into the cash ISA. Always transferring to get a better rate each year.

Lately I have not been able to afford to top up my cash ISA. Anyway I digress.

My instant access cash ISA with Bank A has recently dropped from 3.00% gross to 0.50% gross. I will call this cash ISA 1. I was told I can redesignate with Bank A to a different instant access cash ISA product at 2.60% gross, lets call this cash ISA 2.

When I telephoned to do this I was told by Bank A that I would have to open the new cash ISA 2 product first, and then fill out a transfer form to transfer the balance of cash ISA 1.

Everything will then be contained in cash ISA 2.

I opened cash ISA 2 with a deposit of £340, this is the only deposit I have made into any cash ISA this current tax year (2011-2012).

In the meantime I have seen a better rate of interest with Bank B and their cash ISA 3 at 3.07% gross.

My question is, can I transfer cash ISA 2 into cash ISA 3 even though I only recently opened and funded cash ISA 2?

Yes.

chaotic_j wrote: »

Will I then still have the option of paying the remainder of my ISA allowance into cash ISA 3 this year?

Yes.

chaotic_j wrote: »

Would it only be against the cash ISA rules, if I was to say having opened and deposited into cash ISA 2 then go along and try to open cash ISA 3 and also deposit into it (keeping cash ISA 2 open)?

Usually this would be against the rules. But if cash ISA2 and cash ISA 3 were both with a provider who treats all their cash ISA accounts as one Cash Isa portfolio (like Nationwide does), then it would be ok.

In your case, as Bank A and Bank B are different providers it is against the rules. Its best to transfer and top up at the same time (in one application), or transfer and top-up later.

MoneySaverLog

So you have completed a transfer from cash isa 1 to cash isa 2 at the same bank for a previous years ISA, and deposited £350 from this years allowance into cash ISA 2 at the same time.

There should be nothing stopping you transferring the lot to Bank B, and further subscribing £5,000 this tax year in my opinion.

chaotic_j

MoneySaverLog wrote: »

So you have completed a transfer from cash isa 1 to cash isa 2 at the same bank for a previous years ISA, and deposited £350 from this years allowance into cash ISA 2 at the same time.

There should be nothing stopping you transferring the lot to Bank B, and further subscribing £5,000 this tax year in my opinion.

In a nutshell, yes.

Thank you david78 and MoneySaverLog for confirming my assumptions