Top Cash ISAs Discussion Area

System

No_Brainer wrote: »

Having had no luck getting anyone at HMRC can I ask if anyone can clarify the regulations for ISAs please?
I was considering transferring my existing cash ISA into a 5 year 5% fixed rate. I've so far only used £1040 of this year's allowance which I have just paid into my existing Santander ISA. The fixed rate isa is set to close shortly after which no further payments in are allowed. However, I'm being told that I can't open a new cash ISA to use up my unused allowance of £4300 this year as you're not allowed to pay into two different isa in one year. Is this correct? It seems somewhat unfair if the transfer-in isa is closed.

Since you have already subscribed to your existing Cash ISA with new money using part of this year's ISA allowance, you have to transfer the whole balance in the existing ISA and close it.

Are you sure the fixed rate ISA is not going to allow you to pay new subscriptions after the transfer ? Which fixed ISA is it ?

If it is to close to new subscriptions, then you would need to pay as much as you can manage (up to this year's limit of £5340) into either the existing ISA before the transfer, or into the new fixed rate ISA after the transfer has been completed but before it is closed to new subscriptions.

Baldur

No_Brainer wrote: »

However, I'm being told that I can't open a new cash ISA to use up my unused allowance of £4300 this year as you're not allowed to pay into two different isa in one year. Is this correct?

Yes, it's correct.

It seems somewhat unfair if the transfer-in isa is closed.

If you choose to transfer your current tax year's ISA into a FRISA like this, having been informed that you may not be able to subscribe any remaining balance of your 2011/12 allowance, how can you claim unfairness?

You are creating that situation yourself by choosing a product that's obviously not appropriate for your circumstances.

No_Brainer_4

Thanks. Now that you've all confirmed I can't open a new isa to use the rest of my allowance for the year I'll have to rethink. Either forget the fixed rate, or give up the unused 4K, or put the balance into a stocks and shares isa (though I'm always a bit wary of these after I came a cropper with a PEP many years ago).
But thanks everyone for taking the time to respond. Much appreciated.

Reed_Richards

No_Brainer wrote: »

I've so far only used £1040 of this year's allowance which I have just paid into my existing Santander ISA.

If by "existing Santander ISA" you mean an ISA you started before 5th April 2011 then you are free to transfer any money you had in the ISA up until that date and the interest it has earned into a fixed rate ISA. Just leave behind the £1040 you contributed this year and top it up when you have the funds. Any money you contributed this tax year (i.e. since 6th April 2011) forms part of a completely different ISA to anything you invested in previous tax years. Some banks may offer "ISA accounts" that try to blur this distinction but the rules are very clear.

ritac1

My son has an ISA from last year with Santander currently earning almost no interest at all. I believe their top paying ISA does not allow transfers in. Would it then be possible to open a this years ISA and deposit cash from a savings account and withdraw the funds from the last years ISA and put those into the savings account.

I tend to think that this would not be possible but not sure why.

Can anyone help?

Lokolo

ritac1 wrote: »

My son has an ISA from last year with Santander currently earning almost no interest at all. I believe their top paying ISA does not allow transfers in. Would it then be possible to open a this years ISA and deposit cash from a savings account and withdraw the funds from the last years ISA and put those into the savings account.

I tend to think that this would not be possible but not sure why.

Can anyone help?

Sorry I am a little confused. Does he have money in the savings account now? Or planning on putting money from the ISA, to a savings account, then back into an ISA?

Baldur

ritac1 wrote: »

My son has an ISA from last year with Santander currently earning almost no interest at all. I believe their top paying ISA does not allow transfers in. Would it then be possible to open a this years ISA and deposit cash from a savings account and withdraw the funds from the last years ISA and put those into the savings account.

I tend to think that this would not be possible but not sure why.

Can anyone help?

A Cash ISA *IS* a savings account, just one which earns tax-free interest and has restrictions on the amount which can be deposited each tax year.

Your son could transfer last year's ISA to a provider that accepts ISA transfers and offers a better rate (e.g. Halifax, Nationwide, etc.) AND pay the money from the savings account into a new Cash ISA with Santander.

The transfer must be carried out by the chosen new provider.

ritac1

I understand that an ISA is a savings account, when I mentioned a savings account I was referring to an ordinary Savings account rather than an ISA.
He has funds in the ISA from last tax year and also money in the savings account.
My question was, since the ISA I would like to open doesnt accept transfers in, what is to stop him from using the cash in the savings account to open an ISA this year (the one that doesnt accept transfers in), then withdrawing the funds from the last years ISA and depositing those funds in his savings account?

Or indeed, assuming he had no funds in the ordinary savings account, whats to stop him from withdrawing the funds from the last years ISA earning very little interest, depositing those funds into his ordinary savings account, then opening the ISA (that doesnt allow transfers in) with the funds from the ordinary savings account?

Hope I have explained myself well for all to understand.

P.S. He is a student and pays no tax currently.

ritac1

Lokolo wrote: »

Sorry I am a little confused. Does he have money in the savings account now? Or planning on putting money from the ISA, to a savings account, then back into an ISA?

He does have money in the savings account now. Since the top paying Santander ISA doesnt allow transfers in I wondered if it was possible to transfer the funds from last years ISA to the savings account then open a this years ISA and transfer the funds from the savings to the ISA.

Would this be allowed/possible?

System

ritac1 wrote: »

I understand that an ISA is a savings account, when I mentioned a savings account I was referring to an ordinary Savings account rather than an ISA.
He has funds in the ISA from last tax year and also money in the savings account.
My question was, since the ISA I would like to open doesnt accept transfers in, what is to stop him from using the cash in the savings account to open an ISA this year (the one that doesnt accept transfers in), then withdrawing the funds from the last years ISA and depositing those funds in his savings account?

Or indeed, assuming he had no funds in the ordinary savings account, whats to stop him from withdrawing the funds from the last years ISA earning very little interest, depositing those funds into his ordinary savings account, then opening the ISA (that doesnt allow transfers in) with the funds from the ordinary savings account?

Hope I have explained myself well for all to understand.

P.S. He is a student and pays no tax currently.

ritac1 wrote: »

He does have money in the savings account now. Since the top paying Santander ISA doesnt allow transfers in I wondered if it was possible to transfer the funds from last years ISA to the savings account then open a this years ISA and transfer the funds from the savings to the ISA.

Would this be allowed/possible?

If your son does as you suggest, transferring from an ISA to an ordinary savings account he would lose the tax free status of any money he had saved in previous ISA tax years.

I am assuming he has not subscribed funds into the Santander ISA for the current ISA tax year.

Your son needs to find an ISA account with a reasonable interest rate, some providers that allow transfers in with a good rate include : Halifax, NatWest, Nationwide, etc.
He then asks the new ISA provider to transfer PREVIOUS YEARS SUBSCRIPTIONS from the Santander ISA into the new account so that he starts to receive higher interest payments tax free.

If he also wants to open a 2nd new ISA with the highest possible interest rate with e.g. Santander then he can do that and start funding into this account for the current ISA year up to the limit of £5340