Transferring funds from Santander ISA to 123 account

Old_Timer

I have over £3000 in a Santander cash ISA and also have a Santander 123 current account. As I understand it if I transfer the ISA balance into the 123 current account I will get 3% gross (2.4% after tax) which is a better deal than new tax year ISA offerings unless I commit to a longer term ISA deal, i.e. > 1 year, which I don't particularly want to do. Where my understanding is lacking is that I will effectively withdraw the funds myself from the existing ISA which means I will lose the tax benefits. So what exactly will I lose if I do this?

Cheers

badger09

Old_Timer wrote: »

I have over £3000 in a Santander cash ISA and also have a Santander 123 current account. As I understand it if I transfer the ISA balance into the 123 current account I will get 3% gross (2.4% after tax) which is a better deal than new tax year ISA offerings unless I commit to a longer term ISA deal, i.e. > 1 year, which I don't particularly want to do. Where my understanding is lacking is that I will effectively withdraw the funds myself from the existing ISA which means I will lose the tax benefits. So what exactly will I lose if I do this?

Cheers

The only tax benefits you'll lose are those going forwards -any interest already earned will be tax free up to the date you close your ISA and withdraw the funds.

Don't forget though that the 3% on the 123 account is variable, so is not guaranteed for any specific length of time, whereas 2.3% in the 123 2 year ISA is guaranteed for 2 years:cool:

datostar

If you do move it into the 123 account you will be able to move it back to the ISA (provided it's an instant access type and not a fixed-term product) before then end of the 2014/15 tax year. If the move back is after 1st July, you'll be able to put a total of £15,000 into the ISA (as long as you haven't got an S&S ISA you're subscribing to as well). Probably a good idea to leave a bit in the ISA to keep it open. As said, you'll lose the tax-free status of the moved funds but unless you're able to go over the £15,000 in savings it wouldn't be too much of a problem.
I'm planning on doing something similar myself.