Split ISA Transfer: Help to Buy / Cash ISA Complex? Query

cookie_monster_8

Hey,

Looking for some advice on the rules around ISA Transfers and Contributions. I want to move my money around given the recent rate drops. Hopefully the below is clear. any help is appreciated!

Context

• I have one Help to Buy and one Cash ISA with Nationwide that have been opened in previous years.
• I have already made regular monthly payments into the Help to Buy ISA in April and May of this Tax year but paid nothing into the Cash ISA.
• As I understand Help to Buy ISA is considered a Cash ISA and Nationwide offer a Split ISA service which allowed me to hold and pay into these two products within the same Tax year up to my ISA allowance.
• The interest rates have dramatically fallen on the accounts in recent weeks. 

Aim:

• I want to transfer my Help to Buy ISA to a new provider and my Cash ISA to a separate provider but still use my £20000 allowance this year. As I understand if I pay into a Help to Buy ISA (£2400) I can't pay into another Cash ISA i.e. I loose £17600 Tax Free Savings)

Assumption:

• You can'y pay into two separate Cash ISAs in a given Tax Year
  
• I can pay into a cash ISA, transfer it to another provider and continue to pay into it in the same year

Query: 
Scenario 1: Is the following possible? I don't know how rules work for transfer / pay in in the same year and how a Split ISA is considered if you send it to two providers.

1. Deposit £17600 into my Nationwide Cash ISA
2. Transfer NW Cash ISA to new provider
3. Transfer NW Help to Buy ISA to new provider
4. NW accounts are now 'closed'
5. Continue to pay £200 / month into Help to Buy Provider for remainder of tax year up to £2400
6. Pay nothing more into my Cash ISA
7. Note: Assume next year I could stop paying into Help To Buy and just contribute to the Cash ISA

Scenario 2: I have paid into a Help to Buy ISA this tax year. Can I withdraw the sum of this years deposit so I have effectively contributed £0 and then pay into a another Cash ISA.

1. Keep NW Cash ISA Open
2. Keep NW Help to Buy ISA Open
3. Withdraw the sum of money I have contributed to my Help to Buy ISA this year.
4. Open Cash ISA account with new provider (no transfer)
5. Deposit up to £20000 as per this years allowance

eskbanker

All current year cash ISA contributions need to be kept together in the same account (where multiple cash ISAs with a split ISA provider are regarded as one account), so scenario 1 doesn't work if you're considering two different providers.

Scenario 2 might work if you manage to follow all the rules of the self-repair process correctly but to be honest you're probably better focusing on keeping the HTB ISA going, given its advantageous terms.  Why not keep paying into the HTB (either with Nationwide or transferred elsewhere) and pay the £17,600 into a taxable savings account for now, where it'll earn better interest rates than available in an ISA?  Towards the end of the 2020/21 tax year, i.e. March, you could temporarily pay it into a non-cash ISA, such as an S&S ISA, but keeping it uninvested, and then once 6 April 2021 comes round you can transfer it into the cash ISA of your choice as prior year money, without affecting your 2021/22 nomination....

masonic

Scenario 3 would be better:

Wait until near the end of the tax year, open a S&S ISA or IF ISA and use the rest of your allowance in that (but don't make any investments), on 6th April 2021 open a new cash ISA and transfer the S&S/IF ISA across. Be sure to pick a S&S/IF ISA that does not have a transfer fee as some do.

Miranda25

I am in similar situation:
-currently moving prior year cash ISA money to Ford Money fixed cash ISA
-will continue to do current year contributions into the HTB ISA but it is only £200 monthly
-where would you recommend to open taxable S&S ISA please? I think to keep money there for 1 year and do not want to lose money at the end. Or is it always risk with this type of investment? Many thanks.

masonic

Miranda25 said:

I am in similar situation:
-currently moving prior year cash ISA money to Ford Money fixed cash ISA
-will continue to do current year contributions into the HTB ISA but it is only £200 monthly
-where would you recommend to open taxable S&S ISA please? I think to keep money there for 1 year and do not want to lose money at the end. Or is it always risk with this type of investment? Many thanks.

Your post does not make a great deal of sense. There is no such thing as a taxable S&S ISA, ISAs are not subject to tax. Secondly, if you intend to keep money in the S&S ISA for 1 year, then it is not a similar situation to the previous poster who is just looking for a means to get some additional money into another cash ISA while continuing to contribute to a HTB ISA. If you actually want to invest in a S&S ISA, then I'd suggest a year is not a long enough holding period, even with the lowest risk investments. If you just want to use a S&S ISA to hold money until it can be transferred to a cash ISA, you'd be better off doing as suggested in the post above, namely "Wait until near the end of the tax year", since you won't earn much/any interest on a cash balance in a S&S ISA. An option for a provider would be Hargreaves Lansdown, since they've dropped all of their exit fees and have a pretty efficient account opening system, but there are several other options.

Miranda25

Thank you Masonic.
I tried to say that I need to put somewhere additional money while I pay current year contributions into HTB ISA.

masonic

Ok, so in that case you'd put it in a normal taxable savings account until close to the end of the tax year, when you'd pay it into a new S&S ISA to use the rest of your ISA allowance, and a few days later (in the next tax year) you'd be free to transfer it as previous tax year money to a cash ISA.

Miranda25

Sorry, I am confused. Am I allowed to do contributions into two ISA accounts during the same tax year:
-HTB ISA with Nationwide
-S&S ISA with any other provider
If not then where can I put additional money? Thank you.

masonic

Miranda25 said:

Sorry, I am confused. Am I allowed to do contributions into two ISA accounts during the same tax year:
-HTB ISA with Nationwide
-S&S ISA with any other provider
If not then where can I put additional money? Thank you.

Yes, there are 4 types of ISA:

Cash (which includes HTB)

S&S

Lifetime

IF

You can open and contribute to one of each type per tax year.

Miranda25

OK, so I can have one cash ISA and one S&S ISA and my total contributions should not exceed £20,000. So confusing, thank you.

grumiofoundation

Miranda25 said:

OK, so I can have one cash ISA and one S&S ISA and my total contributions should not exceed £20,000. So confusing, thank you.

You can contribute to one cash isa, one stocks and shares isa each year (and one IF, one LISA). 

You can have as many as you like.

P. S. Since you have HTB isa - have you looked at LISA, may be better for saving for house purchase.