TESSAs - 1 month to keep it tax free!

isasmurf

For all of you who rushed to open a TESSA just before they were withdrawn in April 1999 you have a month left to keep the funds in a tax free wrapper.

You have 6 months from the date of maturity to transfer the capital (not the interest) to an ISA to maintain its tax free status. This means that for those that opened one on the very last day they were available - 5th April 1999, their's matured on 5th April this year. So you have until 5th October to transfer the capital into an ISA.

If anyone tells you that you have to transfer it into a TESSA only ISA (TOISA) don't believe them - they are lying to you. You can transfer it into the cash component of a Mini or Maxi ISA, this includes any Mini Cash ISA you already have. If you want to keep it with a separate ISA manager than who your current Mini Cash or Maxi ISA is with, say with your current TESSA provider, then you can through the TOISA. A TOISA is just a special name given to a Cash ISA to allow you to transfer the TESSA capital to a different manager then your Mini Cash ISA. All TOISAs revert to a normal Cash ISA at the end of the tax year in which the TESSA funds were transferred into it.

Transferring your TESSA capital into an ISA does not affect the £3,000 annual limit on Cash deposits. You can also transfer the interest on the TESSA into the ISA but the interest will count against your annual allowance (not the interest the ISA earns, but the interest transferred from the TESSA).

If you are one of these people who have yet to transfer the matured TESSA into an ISA: Don't lose this valuable tax free wrapper.

Reaper

That's interesting - I had no idea the capital could go into an ordinary ISA. Presumably up to the £9000 maximum possible not the usual £3000?

However there is a practical reason why those who need to make a decision now are likely to be better off with a TOISA...

The current best rates I could find when I was looking recently were with M&S who offer 5.25% on both cash ISAs and TOISAs, but (as mentioned in the M&S thread) they no longer accept applications for cash ISAs from non-customers. However for some bizzare reason they do still accept TOISAs from anybody.

isasmurf

That's interesting - I had no idea the capital could go into an ordinary ISA. Presumably up to the £9000 maximum possible not the usual £3000?

Yes, any TESSA transfer does not affect your normal ISA limit. If you transfer it (up to £9000) into an normal Cash ISA then you can still put in your usual £3,000 as well.

The current best rates I could find when I was looking recently were with M&S who offer 5.25% on both cash ISAs and TOISAs, but (as mentioned in the M&S thread) they no longer accept applications for cash ISAs from non-customers. However for some bizzare reason they do still accept TOISAs from anybody.

That's the other reason why you may choose a TOISA over a normal ISA. I assumed that most TOISAs paid the same as normal Cash ISAs, had no idea M&S still accepted TOISAs!

Reaper

That's the other reason why you may choose a TOISA over a normal ISA.  I assumed that most TOISAs paid the same as normal Cash ISAs, had no idea M&S still accepted TOISAs!

As I mentioned in the other thread it also gives you another benefit - you then count as a M&S customer and are allowed to apply for their cash ISA too! I didn't even have to ask, the guy on the phone suggested it to me.