Transfer or open a new ISA?

meggandbeans

I currently have the Halifax saver direct, the interest rate is going to drop in the new tax year so I want to change to a better account. It only has the maximum one year amount in it so I was wondering:

Should I open a new ISA account, withdraw everything from my Halifax one and put it into the new one, as accounts that don't allow transfers generally have better interest rates
OR
Should I transfer this money into a new account which allows transfers but has a lower interest rate

I'm mainly confused as I read the 'golden rule' on ISAs about never withdrawing money from an ISA as you lose tax-free benefits; but then does this only apply if you have over the yearly limit as obviously a new account wouldn't allow you to put it all in?

And depending on which I chose; when should I do it? Before or after the new tax year?

Thanks

blueberrypie

meggandbeans wrote: »

I currently have the Halifax saver direct, the interest rate is going to drop in the new tax year so I want to change to a better account. It only has the maximum one year amount in it so I was wondering:

Should I open a new ISA account, withdraw everything from my Halifax one and put it into the new one, as accounts that don't allow transfers generally have better interest rates
OR
Should I transfer this money into a new account which allows transfers but has a lower interest rate

The second one.

If you withdraw the money, putting it into another ISA will be using up your ISA allowance for the current year.

If you have put new money into this ISA since April 6th, 2011, you have already used part of your 11/12 allowance, and you must keep all of your allowance for this year together (until the end of the year).

I'm mainly confused as I read the 'golden rule' on ISAs about never withdrawing money from an ISA as you lose tax-free benefits; but then does this only apply if you have over the yearly limit as obviously a new account wouldn't allow you to put it all in?

Transfers (done through the ISA transfer process) don't count towards your ISA allowance. Only new money does. If you withdraw this year's money and put it in an ISA for 12/13, it will count as part of your 12/13 allowance.

And depending on which I chose; when should I do it? Before or after the new tax year?)

It doesn't matter. As a transfer, it doesn't count towards either your 11/12 or 12/13 allowances. The sooner you get it into a better-paying account, the harder it's working for you. Some people feel there will be better offers coming along in the next week or two - whether you want to wait and see if they're right is up to you.