Transfering ISA to Savings Account

ian23

Evening guys, I am transferring my Virgin ISA to my ICICI Bank and it's saying 'You are about to transfer money from a Cash ISA. If you are transferring this money to an account which is not a Cash ISA you will lose the ISA tax-free status on the money you transfer.'

Forgive my ignorance but will I penalised in any way here? The Bank has a much higher interest rate so I think the interest made will outweigh the tax charged but just want to check I wont lose any interest I have already made going from ISA to Savings Account?

thank you

masonic

You won't lose any interest you've already made or pay tax on it, but you won't be able to return your money to an ISA without consuming your ISA allowance - unless the ISA allows flexible withdrawals and you return the money to your ISA before the end of the tax year.

jimjames

It's a standard warning - some people complain they didn't know they were moving money out of their ISA. If you know what you're doing and are chasing the best rate then it's not a problem.

Mr.Saver

Just a warning ahead, the accumulation inside ISA is also tax free, so even if you are paying 20% tax, have a cash ISA with 1.2% rate and ICICI with 1.55% rate, it still doesn't make the ISA unattractive.

If you do the simple maths, you would think that 1.55% taxed at 20% will still leave you 1.24%, higher than the 1.2% you get inside the ISA.

But that's only for now. If you ever get into the higher rate tax bracket, or the rate outside ISA drops, or the rate inside ISA rises, it will be too late to move them back into the ISA. You will be limited by the 20k annual allowance.

Even worse, what if one day you decide to invest the money instead of keeping them in the cash savings account? Inside ISA you can transfer them to a S&S ISA, and earn the dividends and capital gains tax free. But outside the ISA, your capital gains and dividends will be subject to tax once they go over the tax free allowance. If paying tax alone is not bad enough, you will also find that doing the self assessment for all your investments is also a pain in the !!!.

18cc

The other good thing about an ISA compared with a ordinary savings account is that you can easily transfer it from one provider to another

this is particularly useful for large balances. the alternative in a none ISA account is to send the money back to your linked current account and then pay it out to your new savings account trying to dodge the banks fraud filters as you do it

Mr.Saver

18cc wrote: »

The other good thing about an ISA compared with a ordinary savings account is that you can easily transfer it from one provider to another

this is particularly useful for large balances. the alternative in a none ISA account is to send the money back to your linked current account and then pay it out to your new savings account trying to dodge the banks fraud filters as you do it

The fraud detection system surely knows the savings accounts belong to the same person who owns the current account, so why could this be a problem? I've never had any problem as a person who often moves large sums between savings account (interest rate chaser:D).

ian23

At the moment I have a Virgin ISA giving me 0.51% Gross so this is a huge difference!

*I know I should have switched a long time ago!

soulsaver

ian23 wrote: »

At the moment I have a Virgin ISA giving me 0.51% Gross so this is a huge difference!

*I know I should have switched a long time ago!

Virgin Double take ISA 1.45%... ? That should be trouble free?
Tesco cash ISA 1.44?

webjaved

ian23 wrote: »

At the moment I have a Virgin ISA giving me 0.51% Gross so this is a huge difference!

*I know I should have switched a long time ago!

There's better rates out there, I'd look at getting the money moved. :money:

18cc

I have on a couple of occasions with my Lloyds current account had problems when a savings Bond matures and it gets sent to my Lloyds account and then I try and send it out to a new provider which is obviously a new Peggy then it gets blocked on one occasion I've had to go into the branch with my passport

ian23

soulsaver wrote: »

Virgin Double take ISA 1.45%... ? That should be trouble free?
Tesco cash ISA 1.44?

I can only move my yearly allowance to another ISA can't I? Not the whole amount as I would with ICICi?