Opening HTB ISA before fixed rate ISA matures - please help!

kirasia

Oh boy, I could really do with some advice please having just got off the phone to Lloyds who were absolutely clueless and couldn't answer any of my questions!

I currently have around £31k in a 2 year fixed rate (1.2%) ISA which matures on the 14th April 2017 - I was *hoping* to open a help to buy ISA from April 6th 2016 because the return on this is much better than what I'm getting currently, I'm saving for a deposit so feel it is best for my circumstances. I'm concerned though as my current ISA is fixed, can I essentially close this ISA at the end of this tax year and open the HTB one from the 6th April 2016?

In layman's terms, I'd ideally like to do the following:

Keep my fixed rate ISA until the end of the current tax year (therefore only having it for 1 of the 2 years) I would then like to open a HTB ISA (with Halifax as they're offering 4% AER) and keep this until the scheme ends.

If this is possible, what would to my £31k? Would I lose the 1.2% fixed rate on any interest accumulated in the first year, because I won't be continuing for the second? Would I earn any interest at all for the term it's been in the account?

In this link, section 8.1 refers to closing the fixed rate ISA at any time and that I will be charged 180 days worth of interest for withdrawals http://www.lloydsbank.com/legal/savings/fixed-rate-cash-isa.asp presumably by closing the account, I need to put that money somewhere right away and will be charged the 180 days worth of interest for withdrawing - rough calculations show this as around £180, making the rate 0.6% for the year rather than the 1.2% - am I on the right track here?

If I manage to actually do this correctly, and can withdraw the £31k, I was considering using £1200 for my first deposit for the HTB ISA and investing the remainder in Premium Bonds until a better option comes along. I'd then pay £200 from my self-employment income monthly into the HTB ISA..

In my situation, is it possible and if so, would it be better, for me to transfer my cash ISA to the HTB ISA now (I still have around £7k allowance for the current tax year), transferring the first £1000 from the fixed rate ISA and £200pm from my current account from there on and closing the fixed rate ISA paying the fees for closing and depositing the remainder from my fixed rate ISA elsewhere?

I'm so so sorry for all the questions and hope I've been clear! Can anyone offer any help or advice on this? Numbers are not my strong point and I'm getting myself in a complete muddle - the phone call to the bank has just confused me even more and made me lose confidence in asking them any further questions!

Thanks in advance

masonic

You can keep the fixed rate ISA (but not add any more money to it) AND open a new HTB ISA from the start of the next tax year.

Archi_Bald

I haven't read all you posted but ISA rules are simple: you cannot pay into more than one cash ISA in the same tax year. You can keep as many ISAs as you like from previous tax years, and you can transfer those to a different provider or a different [non-HTB] ISA with the same provider. You can also investigate non-ISA accounts that pay better interest than cash ISAs.

xylophone

Presumably you have actually subscribed to this Lloyds ISA in this tax year.

It is now closed for subscriptions? If so, you cannot pay the £7000 to which you refer into another cash ISA in this tax year.

You can open a HTB ISA on 6 April - Halifax might be worth consideration.

You could keep the Lloyds ISA until the end of the term.

If you closed the Lloyds early, you would lose a little over £180 in interest.

However, if you did this, you might put the maximum allowed as a first subscription into the HTB and then consider using current accounts rather than any form of ISA for the balance.

If you have DDs that would generate cash back, you might consider the 123 (Santander) for £20,000.

If possible, you might open a Lloyds Club and a couple of Tesco current accounts - you could use the second Tesco for gathering in the monthly interest on the other accounts.

Lloyds requires a couple of DDs that pay monthly and Santander and Lloyds have a regular pay in requirement but this can be cycled in and out on the same day if necessary.

kirasia

Thank you for your replies, very helpful so thank you very much!

Xylophone, my fixed rate ISA was taken out mid april 2015 but I don't understand what you mean by subscriptions? What I meant by my.. completely rambling thread was that because I can stil pay £7000 into my fixed rate ISA for the current tax year, could I actually transfer it over to a HTB ISA during this tax year and start contributing to that instead, but I don't think that's how it works!

I think what I'll do, is when the new tax year starts, open a halifax HTB ISA, use £1000 from my fixed rate ISA (which will lose me around £5) and then contribute £200 a month from my self employment.

I'll look into moving the rest of my savings into current accounts too as I hear a lot of good things about them!

Thanks once again!

xylophone

A subscription to an ISA is a payment to an ISA.

You have paid into the ISA with Lloyds in this tax year so cannot open an HTB this tax year.

You can open and subscribe to HTB with Halifax in the new tax year on April 6. Remember that this will mean that you cannot subscribe to another cash ISA in the new tax year.

kirasia

OK got it - but I still keep hold of the fixed rate ISA that matures in 2017, and just not pay into it in the new tax year and pay into the HTB one instead..? Think I've got this right?

xylophone

You can indeed keep the fixed term isa but you will not be able to pay in to it in the next tax year if you open and subscribe to the HTB.