Efeect on Cash ISA tax wrapper - S&S ISA transfer

carrspaints

Hi. I have a TSB cash ISA that I have contributed to for a number of years, including this year. It is earning nothing. So I have opened a Vanguard S&S ISA to hopefully get better returns.

The problem I have only just found out is that Vanguard do not accept partial cash ISA transfers. It is all or nothing. My TSB cash ISA has £60k in it, but I don't want to transfer all of that to Vangaurd. I need some for home upgrades.

I know that you can easily lose the tax wrapper benefits of a Cash ISA if you close the ISA account, or move money from it. My question is this: If I move £30k of my ISA funds to my standard TSB savings account, will the £30k remaining in my Cash ISA lose it's tax wrapper protection onCe I get that transferred to Vanguard? Or is it only the £30k that moves to my TSB savings account that looses the wrapper?

jrawle

Assuming your TSB cash ISA allows you to make a partial withdrawal, that should be fine. The balance of your cash ISA remains in the ISA and can be transferred to Vanguard.

Another option, if you haven't opened any ISAs this year, is to open a new cash ISA that accepts partial transfers. Transfer half of your money, then to a "full" transfer of one of the accounts to a Vanguard ISA. (I believe you can still open both a cash and a S&S ISA each year, but others will correct me if those rules have changed.) I would prefer this approach as it means keeping your cash inside the ISA in case you don't go ahead with all the home improvements, or they cost less than expected.

eskbanker

You can withdraw £30K from a cash ISA with a balance of £60K, without affecting the ISA status of the other £30K.

If the end game is to get £30K into a S&S ISA with Vanguard then you can work around the latter's partial transfer constraint by opening a second (temporary) cash ISA that accepts partial transfers, transferring £30K into it and then transferring that in its entirety to Vanguard, both of these transfers being ISA transfers initiated by the receiving provider.  (Probably too many uses of 'transfer' in that sentence but best to be clear!)

carrspaints

Thanks esbanker & jrawle, very helpful replies.

Your point about possibly not going with home improvements is spot on. I'll have a look at what ISAs are available, then potentailly transfer in £30k and get those tax wrapper ISA savings transferred to Vanguard.

Albermarle

in case you don't go ahead with all the home improvements, or they cost less than expected.

In my experience they always cost more than expected .

More importantly it is very difficult to find anybody who is not booked up for at least the next 6 months . Plus they have problems getting hold of some materials.

lozzy1965

Can't you transfer the whole lot to Vanguard and withdraw the cash from there as and when you need it?  Pending the money being tied up in the transfer process of course!

Daliah

lozzy1965 said:

Can't you transfer the whole lot to Vanguard and withdraw the cash from there as and when you need it?  Pending the money being tied up in the transfer process of course!

It’s technically possible but there have been reports of pretty dreadful delays when transferring to Vanguard. I wouldn’t use this route for money which I might need in the next 6 or so months

Worried_fool

Albermarle said:

in case you don't go ahead with all the home improvements, or they cost less than expected.

In my experience they always cost more than expected .

More importantly it is very difficult to find anybody who is not booked up for at least the next 6 months . Plus they have problems getting hold of some materials.

Indeed. So the OP might end up not spending the money allocated for home improvements because s/he cannot get the work done, and so is wise not to take it out of the ISA in the mean time.

carrspaints

Something I wasn't aware of (perhaps obvious to others though). I picked this up off:

https://www.moneysavinge.../savings/flexible-isas/

Some financial institutions offer flexible Cash ISAs (Fixed or variable). TSB offer this. For ISAs containing funds from previous years only, whatever you withdraw you can replace into the same account, so long as it's all in the same tax year. It won't use any of the current year's allowance.

If the ISA has money from previous tax years AND this tax year, it is more complex.. "Withdrawals are first treated as coming from the current tax year's allowance. If you withdraw more than you've put in this year that surplus is treated as being from previous years. When replacing that cash, this is turned on its head. Money put back is first treated as replenishing previous years and, if all is replaced, then the current year. Again, this must all be replaced in the same year as it was taken out".

My remaining variable 2021/22 Cash ISA allowance was £11,945.14. After transferring out £47,400 to my savings account, my Cash ISA now shows my total remaining ISA allowance as £59,245.14. So I can move all funds back to that ISA before the end of this tax year if I wish.

I am assuming that if I did that, that ISA would still enjoy its tax wrapper benefits if I chose to move the funds across to a S&S ISA? And if it didn't would transferring the entire ISA to a new one in 2022/23 see the tax wrapper benefits reinstated?

eskbanker

carrspaints said:

My remaining variable 2021/22 Cash ISA allowance was £11,945.14. After transferring out £47,400 to my savings account, my Cash ISA now shows my total remaining ISA allowance as £59,245.14. So I can move all funds back to that ISA before the end of this tax year if I wish.

I am assuming that if I did that, that ISA would still enjoy its tax wrapper benefits if I chose to move the funds across to a S&S ISA? And if it didn't would transferring the entire ISA to a new one in 2022/23 see the tax wrapper benefits reinstated?

I'm not really following what you're trying to do here and what you mean by separating ISAs and tax wrapper benefits in your last sentence?  If money is in an ISA, it has the tax wrapper benefits, and if it isn't in an ISA it doesn't, so if you didn't replace the £47,400 into the flexible ISA during this tax year then that money can't be replaced into any ISA thereafter, other than as new contributions at no more than £20K per tax year.

If you haven't already, you might wish to read up on the flexible ISA rules at https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#f-isa

carrspaints

Thanks eskbanker. Very clear now and is what I suspetced. Apologies for the spoon feeding queries. Just want to make sure I have this right. Thanks again.