Double ISA pickle

kutekittysweet

I had an ISA in "bank 1" that had a large sum of money. I was paying into it regularly until 2014, when all payments stopped. The only money that went into it was the interest earned on the existing money.

In 2018, I opened a new ISA at a completely different bank ("Bank 2") that is not the same institution as "Bank 1". I was paying into it monthly up to now (the last payment was in May). The payment was only £4 a month, so I haven't used up the ISA allowance for this year.

I've transferred the "bank 1" ISA to a new bank that has a better rate (Bank 3). Can I pay new money into the new Bank 3 ISA? Or will the fact that I have been paying money into the Bank 2 ISA mean that I will fall foul of the double ISA rules? Can I transfer the Bank 2 ISA to Bank 3? 

I've read the online ISA guidance, but and I think because I've paid money in May into Bank 2, that means I have used up my subscription (even though I still have my allowance left, because I was only paying £4 a month). Is that correct? 

eskbanker

You can only pay new money into one ISA of each type in any tax year, so (assuming these are all cash ISAs) if you've paid into bank 2 in May then you can't pay new money into bank 3 until next year, unless you transfer at least this year's contributions from bank 2 to bank 3 first - all current year money must be kept together....

kutekittysweet

eskbanker said:

You can only pay new money into one ISA of each type in any tax year, so (assuming these are all cash ISAs) if you've paid into bank 2 in May then you can't pay new money into bank 3 until next year, unless you transfer at least this year's contributions from bank 2 to bank 3 first - all current year money must be kept together....

So have I broken the rules by transferring the Bank 1 ISA to Bank 3? (I didn’t pay any new money before or after the transfer).
Can I still transfer Bank 2 ISA to Bank 3, or is it too late now that I have transferred bank 1?
(Yes, they are all cash ISAs)
Thank you so much for your help!

eskbanker

kutekittysweet said:

eskbanker said:

You can only pay new money into one ISA of each type in any tax year, so (assuming these are all cash ISAs) if you've paid into bank 2 in May then you can't pay new money into bank 3 until next year, unless you transfer at least this year's contributions from bank 2 to bank 3 first - all current year money must be kept together....

So have I broken the rules by transferring the Bank 1 ISA to Bank 3? (I didn’t pay any new money before or after the transfer).

No, transfers are OK, the above rules relate to paying new money in.

kutekittysweet said:

Can I still transfer Bank 2 ISA to Bank 3, or is it too late now that I have transferred bank 1?

Yes you can and no it's not too late, you can do as many transfers as you like.

kutekittysweet

And I guess once I've transferred bank 2 to bank 3, I can still pay into Bank 3 (but only after transferring bank 2 to bank 3). 
Thanks eskbanker, you have been a big help! I greatly appreciate it.

badger09

Just to emphasise, when you transfer your Cash ISA(s) you must use the new ISA provider's transfer process.