Going From Natwest Isa to Santander

Big_Adam_2050

Good afternoon,

I'm trying to get my money to work a bit harder for me, I have a sum saved for a few years than I don't often if ever touch so I'm looking at locking it into an ISA for a year.

I currently have one with NatWest (at something silly like 0.5%), having poked around the site here and reading up, I went with Santander (I want somewhere physical, not all online).

I set about sorting it today and I think I've messed up (how badly I do not know, hence why I'm here).

I still have an ISA at NatWest but my Santander currently contains nothing as I was going to do all the transfer tomorrow. I want to close the Natwest one, but when I asked the person at the bank she said "well, you'll loose you're allowance", I wanted to take my money from that, keep some and put £5000 into the Santander.

What I don't understand is how taking my money out, I loose my allowance. I thought that was a pay in thing (you can only pay in £5000(ish) per tax year). The woman then suggested I do a transfer, but I understand it you cannot have two ISA's at the same time (I don't want to lock up all my savings for one year, just £5000 of it)?

Really just need someone to very slowly explain it to me.

psychic_teabag

See Martin's transfer guide : http://www.moneysavingexpert.com/savings/cash-isa-transfers

Strictly speaking you don't "lose" your allowance. But you waste it by consuming it unnecessarily. If you don't plan to put any more money into an ISA over the year, it doesn't matter in practise.

The allowance allows you pay a maximum (around £5k) into an ISA each year. You already have money in the ISA world. If you withdraw it, you can pay it into a new ISA as new money, and that will use up your £5k allowance for the year.

But because it's already inside the ISA world, you should instead use the official ISA transfer procedure. This will move the money to the new provider as you want, but it will do so in such a way that it never leaves the ISA world, and so it won't consume any of your 2012/13 allowance.

You can have as many ISAs as you want. The rules say you can only pay new money into one ISA in any year.

What you probably want to do is a partial transfer of £5000. On the transfer form you fill in, it should ask you whether you want to transfer it all, or just some of it.

Unless you're going to spend the rest immediately, you may as well transfer the rest to a better-paying instant-access ISA (eg with Santander) and then it's still within the ISA world. If you choose to later withdraw it to spend it, you haven't lost anything.

psychic_teabag

Have you actually withdrawn anything from Natwest ISA yet ? You say you've opened your new Santander ISA, but have you actually paid anything into it yet ? Even if you have, it's not the end of the world since I think you have a cooling-off period for you to change your mind.

dzug1

You can't do the transfer yourself - you have to have Santander do it for you. Then it will work and retain the allowance.

Big_Adam_2050

Okay,

My NatWest ISA is really my "if I don't put my money here, I'll just spend it on junk" style account. It don't get used much, but I do tend to transfer money back and forth.

That considered, should I then transfer my £5000 from NatWest to Santander then make a new account at Natwest (closing the current ISA with then) to avoid any problems with HM Revenue?

Edit,

I'm bit slow on the mark;

@Psychic Teabag , I have not paid anything in or out of either ISA yet this year. I opened the Santander ISA today.
@dzug1, I wonder why the guy at Santander kept telling me to pay in which cheque then?

psychic_teabag

Transferring money in and out of an ISA is another way to waste your allowance. If you put £2k in, then take £2k out, then in and out again, you've used £4k of your annual allowance, and have a balance of 0 to show for it. Can only add another £1560 for the whole of the rest of the year.

Have you already moved money in since April 6th ?

psychic_teabag

No need to close your Natwest account. You can have as many ISAs open as you want ; you just can pay new money into more than one per year.

EDIT: in fact, if you have already paid any money into Natwest ISA this year, closing it would be a very bad idea : AFAIK you can't then pay new money into any ISA anywhere this year.

if you do a (partial) transfer to Santander, you haven't paid any new money into that, so you can continue to use your Natwest ISA as "this year's" ISA.

Big_Adam_2050

Okay,

My NatWest cash ISA hasn't been touched since Dec 2011. Thats a Cash ISA which I wanted when I opened it as I wanted access to my money.

My allowance is £5000(I know its more than that, but lets stick with it for the sake of my simplicity). If I transfer £5000 from my Natwest to the Santander, can I no longer add or remove money from my Natwest ISA?

Is that correct? If it is, I may not bother till next year / march next year, as I really don't want to be in a situation I have no access to funds (I like to keep a bit in reserve, its why I got the NatWest ISA in the first place).

dzug1

Big_Adam_2050 wrote: »

@dzug1, I wonder why the guy at Santander kept telling me to pay in which cheque then?

If you already have a cheque from Natwest for your ISA with them it's too late to do it as a transfer - it's new money wherever you put it.

Big_Adam_2050

dzug1 wrote: »

If you already have a cheque from Natwest for your ISA with them it's too late to do it as a transfer - it's new money wherever you put it.

I opened the account today, I have not paid money in yet. There is a 7day period to do that.

Rather than be smart and asking first, I thought to ask now before I made a big mistake and had the tax man after me.

No money has moved anywhere yet.

Edit,

A thought occurs, if I transfer £2000 from NatWest to Santander. Does that mean my allowance would drop to £3000 for the rest of the year?

I know it may not be much, but I really get a very poor amount from NatWest and it means I shouldn't hurt for money if anything goes wrong for me over the next year till.

innovate

Your allowance is an annual (fiscal year) thing. Between 6/4/2012 and 5/4/2013, you can pay £5,640 new money into one ISA.

Any money that you already have in ISA(s) for previous financial years does not count towards you allowance for the current year.

Example:

• you have £5,000 in an "old" ISA (that is one you paid into before 6/4/2012)
• you can open a new ISA for the current tax year (as you have already done at Santander)
• you can fill in Santander's ISA transfer form for your £5,000 (or parts of it). Do not move the money yourself
• you can pay up to £5,640 into that same Santander ISA between now and 5/4/2013
• that way, you could earn tax-free interest on £5,000 + £5,640
• come 6/4/2013, you need to review the interest rates again, and might want to do similar all over again