After Cash ISA balance transferred to S&S ISA

Audaxer

Hi there, I am unsure of a few things about transferring a large lump sum payment from a Cash ISA (containing previous years' contributions) into an S&S ISA on a platform:
1) can the transferred funds just sit there within the ISA wrapper as cash until you decide which fund(s) to invest in?
2) if so, does the cash earn any interest at all?
3) if the Cash ISA you are transferring consists of previous tax years contributions, can you still drip feed it into your chosen fund(s) on a monthly basis if you wish, without it affecting this current year's ISA allowance?
Thanks.

chockydavid1983

1) Yes
2) Not sure but I don't think so normally, probably depends on the platform
3) Yes

ColdIron

1. All the platforms I have seen allow this, hard to see how things would work otherwise
2. Sometimes, but don't make any plans as the rates are nominal
3. If all the ISA cash is from previous years then it does not affect this years allowance. If some of it is from this year then it will reduce your allowance. Be aware that if you are with HL their monthly savings are by direct debit from an external source so if you want to drip feed it you will have to do it manually. You also won't be able to take advantage of the £25 minimum investment and shares will cost the full £11.95 and not the reduced £1.50 rate

Sceptic001

chockydavid1983 wrote: »

2) Not sure but I don't think so normally, probably depends on the platform

Barclays Stockbrokers pays 0.25% on cash balances over £50k and 0.05% on £1k-£50k.

Not a lot, but better than a poke in the eye (and better than some cash ISAs). Do any others pay interest on cash balances?

Audaxer

ColdIron wrote: »

1. All the platforms I have seen allow this, hard to see how things would work otherwise
2. Sometimes, but don't make any plans as the rates are nominal
3. If all the ISA cash is from previous years then it does not affect this years allowance. If some of it is from this year then it will reduce your allowance. Be aware that if you are with HL their monthly savings are by direct debit from an external source so if you want to drip feed it you will have to do it manually. You also won't be able to take advantage of the £25 minimum investment and shares will cost the full £11.95 and not the reduced £1.50 rate

Thanks ColdIron, I'd probably do the monthly drip feed manually anyway. I've not yet used one of these platforms, but going to pick one. HL seems to be a bit costly so I'll look at other options as well.

Sorry, I'm not sure what you mean "You also won't be able to take advantage of the £25 minimum investment". How much would each manual monthly transfer cost if transferring to a fund, like say Vantage, rather than direct to shares?

Presumably funds transferred in from another S&S ISA will also just go in initially as cash until I transfer to a fund?

ColdIron

With HL There is no cost to transfer cash into your account and there is no fee to purchase a fund. You may be confusing the issue by referring to a fund purchase as 'transferring to a fund' You are buying something, you don't transfer you money into apples or pints of beer

What I am talking about are the reduced fees and limits if you use their Monthly Saving Plan (the automated one via Direct Debit from an external account)

For funds you have to purchase at least £100, with the MSP it can be as low as £25

The usual fee for purchasing shares, Investment Trusts or EFTs is £11.95. With the MSP it's reduced to £1.50

Other platforms may have similar reduced fees and limits on monthly savings plans but you would need to check

soulsaver

Yep the interest on cash held in a S&S ISA if any, is diabolically low.
However, believe it or not, interest earned on cash held in a stocks & shares ISA used to be (may still be) taxable.

Audaxer

soulsaver wrote: »

However, believe it or not, interest earned on cash held in a stocks & shares ISA used to be (may still be) taxable.

That seems strange within an ISA. If that's true I guess it was previously taxed at source but as other interest on savings account is not taxed at source any more, I assume it would only be liable for tax if your savings interest is more than £1,000 a year.

ColdIron

It was always a poorly defined and hard to enforce law. The idea was that money in an investment ISA was supposed to be invested and not used to squirrel away cash to dodge the 50% cash ISA allowance limit in effect at the time. Obviously you will have cash in your account for valid reasons so the wording talked about only keeping cash for a reasonable time but never defined what that time was

It was scrapped in, I think, the 2014 budget by Osborne along with the other pension and ISA reforms where you can now use 100% of your ISA allowance for cash. Don't worry about it

Audaxer

ColdIron wrote: »

It was always a poorly defined and hard to enforce law. The idea was that money in an investment ISA was supposed to be invested and not used to squirrel away cash to dodge the 50% cash ISA allowance limit in effect at the time. Obviously you will have cash in your account for valid reasons so the wording talked about only keeping cash for a reasonable time but never defined what that time was

It was scrapped in, I think, the 2014 budget by Osborne along with the other pension and ISA reforms where you can now use 100% of your ISA allowance for cash. Don't worry about it

Thanks, does that definitely mean any cash held now in an S&S ISA is free from any tax liability? I realise the interest rates are likely to be very low anyway.