Question on closing an Mini-Cash ISA and opening an Mini-Cash ISA

edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
7 replies 672 views
GnidGnid Forumite
112 Posts
edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
I am getting confused.

Facts:
2005/06 - £3,000 in Bank A's a mini-cash ISA.
2006/07 - want to put £3,000 in Bank B's mini-cash ISA.

Questions:
1. If I apply before the tax year for Bank B's ISA, does that mean Bank B holds £3,000 on my behalf? Do I get interest on that before the tax year starts?

2. How do I minimise the gaps if I want to transfer from Bank A to Bank B (even if I have an extra £3,000 laying around)??

Getting confused!!

Replies

  • masonicmasonic Forumite
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    I hate to break the news to you, Gnid, but we are approaching the 2007/08 tax year.
  • GnidGnid Forumite
    112 Posts
    I know...I just want to know what happens between years...I am getting very confused on these things!
  • david78david78 Forumite
    1.7K Posts
    You can't put money into Bank B's mini Cash ISA until the new tax year starts. You best course of action is to open one next year and put some money in at the same time.

    Technically, you can open the ISA with Bank B now and make your first deposit in the new tax year, and some providers may offer this facility. I doubt if many do. Certainly providers offer this facility for stocks and shares ISAs but they ask you to send them the initial deposit with your application form, which they bank but do not pay you interest.

    As for transfering your ISA from bank A you can do this anytime. There may or may not be a small gap in time (a few days) when you don't get any interest. It depends on the providers of the old and new account.
  • LittleVoiceLittleVoice Forumite
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    Hold on!

    The OP doesn't appear to have opened a mini cash ISA for this year (06-07). Therefore Gnid can open one with Bank B this year (as long as it's by 5 April). That does depend on having the money available though!

    Gnid - you would get interest on the money in Bank B (if it's fresh money and not a transfer) but only for the number of days that the money is cleared in your account. (I say that because other threads have shown some people think they would get a full 6% - or whatever interest rate it is - on the whole amount even though it's only been in the account for days not a full year.)

    If it was about transferring the 05-06 money from Bank A to Bank B then, as david78 says, that would be OK at any time - as long as the money is transferred between the banks and not withdrawn and reinvested. Obviously if the second has the better rate of interest, then it is better to do it sooner rather than later. I have only transferred money into Nationwide and they pay interest from the date of the paying bank's cheque, so no loss of interest (or one day at most).
  • masonicmasonic Forumite
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    It looks like my little hint was not sufficient. As LittleVoice says, you have just 4 working days to use up your 2006/7 allowance before the tax year rolls over and you lose it. I would recommend paying it into Bank A ASAP and then transferring the lot to Bank B at your leisure (assuming Bank B accepts transfers).

    If Bank B is Barclays, or NS&I (or even ING Direct), then you won't be able to transfer previous contributions into it, so you will have to act fast to get any money into it this tax year. You would need to open an ISA with Bank C and transfer your funds from Bank A, if you wanted a better rate on that money.
  • GnidGnid Forumite
    112 Posts
    Thanks guys! So seems like there will be some gaps for no interest if I don't transfer from bank to bank!

    Thanks!
  • LittleVoiceLittleVoice Forumite
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    It's important to transfer and not withdraw and re-invest.

    If you withdraw the money and re-invest the re-investment will count as a fresh contribution in the year in which it is made.

    You therefore lose the benefit of being able to add more in a year and also, if you had more than £3K, you lose the tax-free nature of the funds from the previous years and could not, of course, invest the excess over £3K in an ISA.

    Hope that makes sense.
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