opening ISA having just closed one

ChopinonaBudget

Can anybody answer this question? I've looked online and can't answer it myself.

I previously had a cash ISA with Halifax but closed it as I had to raid it for a deposit on a new rental house. I kept it open until a few weeks ago with £3 in it and then finally got around to closing it.

The problem is I'm now sorting out my finances again and saving for tax bills etc (I'm self employed) and want to open another ISA, but everywhere I look, I find regulations stating that I should have transferred this £3 or that I cannot hold 2 ISAs simulataneously in the same tax year, but nothing to say whether I can close one ISA and then open another one (and still be within ISA savings limits)

SO can I open a second ISA this year? The first one is closed, and had no money deposited in it this tax year anyway, just a trailing balance from 2012-2013.

Thanks

bowlhead99

The rule is, you can't "fund" or "subscribe to" 2 cash ISAs in the same tax year without doing an official transfer between the two.

However, the ISA you closed was funded in a different tax year, and no money put into it this tax year. So you can answer quite truthfully on the application form, no I have not subscribed to another cash ISA in this tax year. And get a new account.

It is merely the second account you have used this year, it is the first one you have deposited in this year. Some people would have 10 accounts or more from different tax years with different providers.

ChopinonaBudget

bowlhead99 wrote: »

The rule is, you can't "fund" or "subscribe to" 2 cash ISAs in the same tax year without doing an official transfer between the two.

However, the ISA you closed was funded in a different tax year, and no money put into it this tax year. So you can answer quite truthfully on the application form, no I have not subscribed to another cash ISA in this tax year. And get a new account.

It is merely the second account you have used this year, it is the first one you have deposited in this year. Some people would have 10 accounts or more from different tax years with different providers.

Brilliant thank you! I thought this might be the case as nothing else made sense, but I couln't make head nor tail of the regulations so thank you for clarifying this! I'll open one this week!

colsten

Just in case you are unaware: you might be able to earn lots better interest in current accounts. There's not much reason to put any money into a cash ISA much before end of March next year, if at all.

ChopinonaBudget

colsten wrote: »

Just in case you are unaware: you might be able to earn lots better interest in current accounts. There's not much reason to put any money into a cash ISA much before end of March next year, if at all.

Cheers for this I've had trouble getting accepted for current accounts in the past though, so I'm sticking where I am now I've got a good one that'll have me! Hopefully when I've cleared this mass of debts, I'll have a bit more choice

eskbanker

ChopinonaBudget wrote: »

Cheers for this I've had trouble getting accepted for current accounts in the past though, so I'm sticking where I am now I've got a good one that'll have me! Hopefully when I've cleared this mass of debts, I'll have a bit more choice

Chances are that the interest on some or probably all of your debts will far outweigh the rates you'd get from saving so it's likely to be more cost-effective to pay off debt than save....

bowlhead99

eskbanker wrote: »

Chances are that the interest on some or probably all of your debts will far outweigh the rates you'd get from saving so it's likely to be more cost-effective to pay off debt than save....

That's sound advice but if you're in a position where you don't have any spare cash buffer and you need to pay a tax bill in X months, it can be smarter not to max your payments on the debt, because when the time comes to pay your tax you would only need to re-borrow again and with a shot credit rating you may struggle to do that at sane interest rates, causing you to end up defaulting on something.

I've been in the situation before of having cash to pay off an interest bearing debt and not done it - it's counterintuitive to deliberately incur borrowing costs when you could eradicate them, but you do not want to be in a position of wiping out your cash buffer to clear debts and pay your security deposit on a flat, and then have an emergency where you can't make rent that month because you lost your job and the bank won't give you loan or overdraft because of your lack of job. It's a balancing act but more of an art than a science.

ChopinonaBudget

Thanks esk and bowl my tax bill will now hit over £2k so I can't risk hoping I can find that sort of credit each year :eek hence the need to now save for it!