ISA/Tax Year question

Lollypop75

I set up an ISA after (finally) paying off my overdrafts in January this year. I wasn't able to put much into it, really, just a few hundred pounds, so I didn't get much interest. But I figured I have to start saving somewhere.

Anyway I had a look for a different ISA with the new tax year, and am just in the process of opening one. However my interest from the first ISA went into the first ISA on 6th April. Does that count as me having subscribed to that ISA in this tax year? As I said it wasn't very much money at all!

psychic_teabag

No, the interest does not form part of your allowance. It doesn't mean you've subscribed to that ISA for this year.

You don't have to open a new ISA each year. You can continue to add money to the same one, as long as the rate remains good. (And you should be transferring it if the rate's no good.) But it's equally valid to open a new one each year, just as long as you don't neglect your old ones.

Lollypop75

Thanks! When you say it like that it seems obvious!

The rate for the ISA I opened last year is guaranteed for 1 year, which means only up until January, so I want to open a new one that'll last me the whole year! It does have a slightly better interest rate anyway.

psychic_teabag

Yes, my inclination would be to transfer now while the rates are good. (Rates tend to be good around March/April.) No need to wait until the end of the bonus period. (Unless the T&C state that the bonus is paid on the anniversary only if the account is still open - worth checking that. e.g. when Halifax were doing their "reward" bonus I think the 0.2% extra bonus was paid on anniversary. But I may be wrong.)

Some providers allow you to "redesignate" an existing ISA, to restart the bonus period. e.g. Halifax have an online form to do it.

The best rates tend to come from ISAs which don't allow transfers. So there is a case for transferring your old ISA to tbe best transfers-allowed ISA, but opening a new no-transfers-allowed one. Depends how much effort you want to go to get an extra 0.1% or so.

Transferring is almost always the "correct" thing to do. But if you only have a few hundred, and won't be using the whole allowance this year, you could withdraw the money from the old ISA and deposit it as new money, to use one of the no-transfers-allowed accounts. Wastes a little bit of your annual allowance, but not a problem if there's no chance that you'd use it all anyway.

Lollypop75

Yeah - I'm planning on withdrawing it and investing it in my current one, but I just want to wait and see as I am applying for new jobs at the moment. I probably wouldn't use it all up anyway, but will see how things work out.

Thanks for all of your help!

evenasus

Lollypop75 wrote: »

Yeah - I'm planning on withdrawing it and investing it in my current one, but I just want to wait and see as I am applying for new jobs at the moment. I probably wouldn't use it all up anyway, but will see how things work out.

Thanks for all of your help!

No, you mustn't withdraw the money yourself - you need to use a transfer form from the provider you wish to go with.

psychic_teabag

"Mustn't" is a little strong - it's the OP's money, after all. OP has only a few hundred in the ISA, and if they are not planning on using the full allowance, a self-transfer is a perfectly valid way of getting the best rates (exploiting a no-transfers-allowed ISA).

The ISA-transfer process is almost always the correct thing to do, but not in every case. Everyone should fully understand the consequences of a self-transfer, and the advantages of a proper transfer, before making an informed decision about which approach to use.

Lollypop75

As I understand it the consequences of withdrawing it and investing again are that I use up some of this year's allowance? However, I only have about £600, and I don't anticipate coming close to using up this year's, so that doesn't really apply to me.

Anyway, I'll leave it where it is for the time being, just in case I manage to save a lot more than I expect to at the moment.