Complicated ISA transfer query

TranceNRG

Hi guys,
I have a slightly complicated ISA transfer query. Hope you will be able to give me some advice

Currently I have a cash ISA with HSBC for £21000 (combined cash ISAs from 13/14 and 14/15 in to one). I also have a non ISA account with Fidelity (that holds a few funds) that has a value about £4000.

I want to convert the non ISA account at Fidelity to an ISA account using previous years ISA allocation using my ISA account at HSBC (transfer).

Here's the tricky bit... I am in the process of buying a new flat so I need most of the money in my HSBC cash ISA. I would like to withdraw £17000 from the HSBC cash ISA and transfer the rest (£4000) in to Fidelity. I want to then convert the existing non ISA account (which also holds about £4000 in funds) in to this new ISA account and finally withdraw the £4000.

So long story short, I want to withdraw £21000 but use £4000 from last year's allocation (without using this year's allocation) to convert the non ISA account at Fidelity to an ISA account.

I rang Fidelity and explained this to the guy on the phone and I think he understood me and he basically said it's not possible as I have already exhausted last year's allocation and he said I will need to use this year's allocation to convert.

Do you know if it's possible to do this? If so how?

thanks in advance.

jimjames

You can't use previous year's allowance after the tax year has ended.

You can't transfer shares into an ISA. You have to sell them and then pay the cash into the ISA to purchase them again.

Easy way is to sell the non ISA funds to generate the cash you need for your flat.

Withdraw the cash you need from your ISA and then transfer the balance to Fidelity to purchase whatever funds you want.

TranceNRG

jimjames wrote: »

You can't use previous year's allowance after the tax year has ended.

You can't transfer shares into an ISA. You have to sell them and then pay the cash into the ISA to purchase them again.

Easy way is to sell the non ISA funds to generate the cash you need for your flat.

Withdraw the cash you need from your ISA and then transfer the balance to Fidelity to purchase whatever funds you want.

That works! Are there any negatives to doing this? If I sell my current funds and buy new funds won't I be buying them at a higher price? Hence less shares?

jimjames

TranceNRG wrote: »

That works! Are there any negatives to doing this? If I sell my current funds and buy new funds won't I be buying them at a higher price? Hence less shares?

There will be a small difference in price due to the spread but you'll have that whenever you have to sell and rebuy.

The alternative is to just keep them outside the ISA which won't incur any cost other than tax if you're not basic rate taxpayer.

bowlhead99

1) Take out £17000 from your HSBC ISA.
2) Transfer the remaining £4000 HSBC ISA to Fidelity.

You then have a Fidelity S&S ISA with no holdings and £4000 of cash.
You have a Fidelity non-ISA account with £4000 of miscellaneous holdings.

3) Spend the £4000 cash in the Fidelity S&S ISA to buy whatever holdings you would like to hold within your Fidelity S&S ISA
4) Sell the miscellaneous holdings in the Fidelity non-ISA account and withdraw the resulting cash after it has taken a few days to credit.

You are then left with a Fidelity ISA with £4000 of holdings which has been funded from previous year subscriptions. You have not used any of your 2015/16 subscription allowance.

The guy at Fidelity is right that if you asked them to sell your £4000 of unwrapped holdings and move the resulting proceeds into your new Fidelity S&S ISA to buy the same holdings inside the ISA, that moving of money into the ISA would count as a 2015/16 subscription. If you are not going to be able to max out your 2015/16 subscriptions this year anyway, that might be simpler, as you wouldn't need to move the HSBC money at all and could just withdraw £21k to buy the flat.

But if you want to preserve all your 2015/16 allowance untouched, you'll have to transfer HSBC cash to Fidelity, buy some holdings inside that new transferee ISA, and independently sell your unwrapped Fidelity holdings.

TranceNRG

bowlhead99 wrote: »

1) Take out £17000 from your HSBC ISA.
2) Transfer the remaining £4000 HSBC ISA to Fidelity.

You then have a Fidelity S&S ISA with no holdings and £4000 of cash.
You have a Fidelity non-ISA account with £4000 of miscellaneous holdings.

3) Spend the £4000 cash in the Fidelity S&S ISA to buy whatever holdings you would like to hold within your Fidelity S&S ISA
4) Sell the miscellaneous holdings in the Fidelity non-ISA account and withdraw the resulting cash after it has taken a few days to credit.

You are then left with a Fidelity ISA with £4000 of holdings which has been funded from previous year subscriptions. You have not used any of your 2015/16 subscription allowance.

The guy at Fidelity is right that if you asked them to sell your £4000 of unwrapped holdings and move the resulting proceeds into your new Fidelity S&S ISA to buy the same holdings inside the ISA, that moving of money into the ISA would count as a 2015/16 subscription. If you are not going to be able to max out your 2015/16 subscriptions this year anyway, that might be simpler, as you wouldn't need to move the HSBC money at all and could just withdraw £21k to buy the flat.

But if you want to preserve all your 2015/16 allowance untouched, you'll have to transfer HSBC cash to Fidelity, buy some holdings inside that new transferee ISA, and independently sell your unwrapped Fidelity holdings.

Thanks mate. I think you and JimJames are saying the same thing.

I am not sure at the moment whether I'll be able to use the full allocation of 2015/2016 ISA yet. If I don't have any unexpected expenses I should be able to fully use it (with the company bonus and all that) so I should keep my options open and take you guys' advice to sell the current funds and transfer £4K from HSBC to Fidelity.

Thank you both for your quick and helpful replies.

bowlhead99

TranceNRG wrote: »

That works! Are there any negatives to doing this? If I sell my current funds and buy new funds won't I be buying them at a higher price? Hence less shares?

Of course you might buy them at a higher price, but you might buy them at a lower price. It depends on what the price does over the time between buying and selling.

If you bought 3000 shares originally at £3000 (£1 a share) years back and they are now worth £4000 to sell (1.333 a share) then you will still be able to afford roughly 3000 shares with your £4000. But if the buy price is 1.34, maybe you will only end up with 2985 shares going forward. In the long term it is not worth losing sleep over. The advantage of having the shares inside an ISA wrapper instead of not inside an ISA wrapper could be worth several percent or several tens of percent over the years as the fund values get bigger and you move into higher tax bands etc.