Rules on opening an ISA and paying into existing ISAs

TightAndy

I understand that you can only open 1 ISA each tax year but what if you have an ISA, such as NS&I currently provide, that allows you to pay in when you want as you want the accessibility; but you also want a fixed account that pays higher interest?


I tried to open a new ISA for my Mum with HSBC as her existing ISA was only giving 0.1% and they had a new ISA available for over 1%, a no-brainer I thought.
Unfortunately when my Dad (now passed away) opened it the "nice young man" who helped them persuaded my Dad to set up a standing order of £50 per month from their joint account into an ISA for my Mum. When I tried to arrange a new ISA for her at the end of May last year HSBC said the rules would not allow a new ISA to be opened as a payment in mid April had been made into the existing 0.1% account and that the government rules meant that she could not open a new ISA in that tax year. [Obviously I stopped the offending standing order straight away but thought I could do no more.]


Assuming the above is true and HSBC were not spinning me a line; Say I had an ISA, opened in the previous tax year, with NS&I which allowed payments anytime and I had paid £1 into it on the 8th April this tax year. Does that mean I am not allowed to OPEN a new ISA with NS&I OR ANY OTHER PROVIDER at all this tax year as I have paid into an existing ISA?
Should I have opened the new ISA on the 7th and THEN made the payment on the 8th or would that have been disallowed?

bigfreddiel

The rules are simple

You can open as many ISAs as you like

You can only pay into one of them in any tax year.

First complication, you can have an equity ISA and a cash ISA and you can pay into both in a tax year.

You can transfer a cash ISA to onother one and then pay into that one, if their rules allow.

I have t a clue about these new ISAs, lifetime and htb but I don't think these apply in your case.

Good luck fj

Linton

The restriction isnt on opening a new cash ISA, but rather putting new money into an ISA in a tax year. So once you have put new money into one cash ISA, say £1 on April the 8th, then you cant put new money into another cash ISA. You can put old money from a previous tax year via a transfer from another ISA into any ISA whenever you want.

TightAndy

Sticking to just one type of ISA such as CASH ISAs: So I can transfer as much and as often as I like from existing ISAs into new or old ISAs as long as I don't put anything from this years allowance in them; BUT if I invest just £1 on the 7th April into ANY ISA, existing or new, that is the ONLY ISA I can invest that years remaining £15,239 allowance in. Correct?

veryintrigued

2017/2018 ISA allowance for new money is 20k and whether you can transfer in will depend on the T&Cs of the new ISA but if it does you'll be able to transfer ANY amount of ISA money from previous years.

CLAPTON

TightAndy wrote: »

Sticking to just one type of ISA such as CASH ISAs: So I can transfer as much and as often as I like from existing ISAs into new or old ISAs as long as I don't put anything from this years allowance in them; BUT if I invest just £1 on the 7th April into ANY ISA, existing or new, that is the ONLY ISA I can invest that years remaining £15,239 allowance in. Correct?

almost correct except

if e.g you put £1 into an ISA on (say) 10th april 2016 ; you can transfer that ISA to another one and then contribute the remaining 15,239 to the new one up until 5th april 2017

Linton

TightAndy wrote: »

Sticking to just one type of ISA such as CASH ISAs: So I can transfer as much and as often as I like from existing ISAs into new or old ISAs as long as I don't put anything from this years allowance in them; BUT if I invest just £1 on the 7th April into ANY ISA, existing or new, that is the ONLY ISA I can invest that years remaining £15,239 allowance in. Correct?

Correct up to a point. But you can open a new ISA or select an old ISA (X) in the current year and transfer in the total new contributions (£1) from your current open ISA (Y). Then you can add further contributions to your ISA (X). So you can only have 1 ISA open for contributions at any one time in any one tax year.

TightAndy

Thanks for all your help. I was looking at the 1% NS&I ISA as a background tax efficient savings account opened in this tax year, with the option of putting a lower than full allowance lump sum into a high interest 5 year fixed rate interest ISA in the next tax year while still being able to put short term funds in and out of the NS&I account.
Looks like my 'cunning plan' was a bit of a Baldric.

TightAndy

Linton wrote: »

Correct up to a point. But you can open a new ISA or select an old ISA (X) in the current year and transfer in the total new contributions (£1) from your current open ISA (Y). Then you can add further contributions to your ISA (X). So you can only have 1 ISA open for contributions at any one time in any one tax year.

Going back to my opening post re what HSBC told me:- Are they wrong in that, despite the standing order payment into the existing 0.1% account within this tax year, I could have opened a new account elsewhere and transferred the existing ISA (with the £50 payment made in April) and still invested the remaining £15,190 of this years allowance into the new account?

bigfreddiel

Cash ISAs are pointless for any long term savings.

Equity ISAs are the correct platform for your savings. For some reason the majority of people are frightened of this route to tax free riches.

Cheers fj

Eco_Miser

TightAndy wrote: »

Going back to my opening post re what HSBC told me:- Are they wrong in that, despite the standing order payment into the existing 0.1% account within this tax year, I could have opened a new account elsewhere and transferred the existing ISA (with the £50 payment made in April) and still invested the remaining £15,190 of this years allowance into the new account?

That is correct, HSBC were wrong. You would have had to open the new account without paying any new money into it, until after the transfer took place.