Is money left in an 'old' ISA still tax free?

_kat_cardiff_

Hi looking for advice please.

I have used my ISA since 2008 and with inheritance over the last few years I have exceeded the FSCS limit for a single account.

Therefore I wondered, if I open a new ISA in April, transfer some of my old ISA balance into this and add in the years £20k as new money. Is this years 'active' ISA and my previous 'static' ISA both tax free?

i.e. can i open a new ISA every year and whatever isn't transferred in from previous ISAs remains tax free in old ISA account accounts?

And if I got into a situation where old ISA rates became low, I could transfer this balance into a new ISA each year to remain tax free? (rather than withdrawing it and it becoming on-ISA money)
i.e. cycle the money around old and new ISA accounts, whilst the total remaining tax free?

Hope that maes sense!

Thanks in advance

eskbanker

Yes, any money within ISAs is tax-free, regardless of whether it's current year money, prior year money in its original account, or prior year money transferred to a different ISA (via ISA transfer process, not withdrawing/depositing).

bowlhead99

Yes. Anything in an ISA is free of UK tax on income (interest, dividends, property income distributions) and on capital gains. It doesn't matter how long ago the ISA was created or how many separate ISA accounts you have on total.

The annual subscription limits are to do with how much new money you can put into an ISA that wasn't already in an ISA, during a tax year. They don't affect what you can do with money that's *already* in an ISA from a previous year.

For a given type of ISA (e.g. cash ISA, S&S ISA), all the 'current-year money' (i.e. money which wasn't in an ISA before this tax year but has been newly subscribed into an ISA this tax year), must sit in the same place. Whereas, the money that is not current-year money, can be transferred between different ISA providers as often as you like (subject to the receiving ISA provider being happy to take it).

_kat_cardiff_

Thanks you - I thought so but a bit long winded for google to find me a clear answer!

EthicsGradient

_kat_cardiff_ said:

Therefore I wondered, if I open a new ISA in April, transfer some of my old ISA balance into this and add in the years £20k as new money. Is this years 'active' ISA and my previous 'static' ISA both tax free?

Some ISA providers don't allow you to transfer only some of an existing balance to another provider - they may say it's all or nothing, so check with yours. You could, of course, find a new provider that will allow future partial transfers, transfer all your existing one to that, and then you'd have the flexibility to partially transfer, to keep under the FSCS limit.

afis1904

I obviously don't know about your circumstances but you do have a £1000/£500 (the latter if you're a higher rate taxpayer) tax free savings allowance.

Presumably since the money was in the same ISA for that long the rate is gonna be quite crap so I'd suggest you'd also look into the best non ISA savings apart from your ISA.

eskbanker

afis1904 said:

I obviously don't know about your circumstances but you do have a £1000/£500 (the latter if you're a higher rate taxpayer) tax free savings allowance.

At the risk of being pedantic, money in ISAs is genuinely tax-free, but the £1000/£500 allowance you refer to is strictly a nil-rate band, i.e. the income has to be recognised/declared but taxed at 0% rather than actually being ignored as tax-free.  For most this distinction is irrelevant but it can make a difference for some:

https://blog.moneysavingexpert.com/2016/02/the-new-personal-savings-allowance-means-some-people-will-be-better-off-earning-less-interest/

Dazed_and_C0nfused

At the risk of being pedantic, money in ISAs is genuinely tax-free, but the £1000/£500 allowance you refer to is strictly a nil-rate band, i.e. the income has to be recognised/declared but taxed at 0% rather than actually being ignored as tax-free.  For most this distinction is irrelevant but it can make a difference for some:

Not pedantic just the facts