Question about opening a second cash ISA

MikeR371

I opened a new cash ISA with Birmingham Midshires, filled out the transfer form and sent it all off in the middle of April, along with a cheque for 2k as a first deposit for this financial year (I transferred in about 10k from NatWest).

I wanted to pay in a bit more and gave them a call to ask how to do this. They told me that as the product has now been withdrawn I can't pay any more into this. But he went on to say that I could open a new cash ISA with someone else and use that. I questioned this as I thought you couldn't open more than one cash ISA in the same FY, but he said that because mine was a transfer in it doesn't count and I'm perfectly free to open another one.

I double checked with him and he seemed certain. I can't find anything by googling - is he correct? I hope so - I don't want to lose the rest of my annual limit!

tanith

It doesn't sound right to me either, you say you sent a cheque for the deposit so you paid in 'new money' it doesn't matter that you also transferred in once you have paid into an ISA with money for this financial year you can't then pay into another . Thats my understanding anyway. Perhaps the guy didn't notice that you'd transferred in and paid in a cheque.

psychic_teabag

It does indeed sound like you've subscribed to the ISA this year. I assume it's a fixed-term ISA.

In principle, BM could allow you to open another ISA with them : I believe the rule is actually that you can only subscribe to a single ISA manager per year. Most providers implement that by allowing only one ISA per year, but some (Nationwide and at least one other that I can't remember off-hand) allows you allowance to be spread over several different ISA accounts.

If he says you can open another ISA with someone else, then he ought to be fine with you opening another ISA there. And that might be within the rules..? But I really don't know.

Fixed-term ISAs tend to allow early access. Usually with a penalty of some sort, and often only by closing (which includes transfers). So could possibly accept the penalty and transfer to instant-access, then top-up, then transfer back to fixed. (Or transfer just the old subscriptions back out, keeping current year's subscriptions in instant-access until all in.) Unfortunately, if you have to transfer the whole lot, the penalty will apply to the old money as well as the new money.


If you tend to use up your ISA allowance over the year (rather than all at start of year), you could change strategy and build up in a regular-saver account (often gives better return than ISA despite being taxable) and transfer to ISA once a year as it matures.

MikeR371

Thanks for the replies.

Now I think about it a bit more though, I got a bit of that wrong. I didn't actually send them a cheque, I paid 2k into the previous ISA (in the current FY) before starting the transfer process. So I wonder if this changes things?

Lokolo

It doesn't change things but from his side all he see's is that it's a transfer so he doesn't know you've subscribed to it this year.

You would have to open another ISA with BM and use the rest of your subscription there.

MikeR371

OP here. This is getting increasingly bizarre. I emailed Aldermore bank to ask their opinion. This is what they replied:

You can open as many ISA's as you wish. However each tax year you are given a maximum allowance of funds you can invest. This tax years allowance is £5,640.00 Funds transferred from an existing ISA into a new ISA which contain allowances from a previous tax year will not affect the current tax year's allowance.

Therefore, if you have transferred £1,000.00 into your existing ISA in this tax year you are able to invest the remaining £4,640.00 into a new ISA.

So now I've had two professionals (Birmingham Midshires and Aldermore) telling me I can open a new ISA, and everyone else telling me I can't. If I did open one with Aldermore, what's the worst that could happen?

thenudeone

You can put £5640 of new money into a Cash ISA this year

Transfers do not count against this annual allowance.

Simples.

Yorkie1

Money paid in during the current tax year is treated differently from money paid in during previous tax years.

I think of ISAs in terms of envelopes.

For money paid in during the current tax year, you can only have one envelope at a time. Therefore you can't have your £2K in BM, and the rest of the balance in a second envelope / ISA with a different provider.

The only way to pay in more money this tax year is either to pay it into your existing BM ISA - except that its T&Cs don't appear to allow this - or to transfer all of your existing BM ISA to another provider (by going to that new provider and getting them to do the transfer) and then putting new money into it after transfer. Using the second way, you still have the same single envelope - it just has a different provider's name on the front of it.

For money paid in in previous tax years, you can split it into as many envelopes as you want. So you could keep your £10K with BM, or go to a new provider (or more than one), and ask them to transfer some or all of the previous money to a new ISA(s). The reason you can do this, is because transferring old money doesn't count as funding a new ISA - you did the funding in previous years.

Hope that's not over-complicated matters!