Fixed rate cash ISA 17 March 2022 at 10:30AM in ISAs & tax-free savings 6 replies 283 views

dustyroad46

Thought I knew all about Isa’s but shows you can’t take anything for granted. I opened a fixed rate isa but at the time could not deposit the full rate of £20000. The account had a deposit window of 3 weeks before closing to further deposits which I was well aware of. Three months later and now with spare cash in same tax year I’m unable to put this in the original as it’s closed to further deposits. I cannot open another cash isa with the same company or any other as rules state that you can only have one cash isa of the same type in any one year. This means I’m effectively unable to make use of the £20000 maximum allowed. The only option would be to transfer the original isa to another provider and then add the spare cash but this will mean 90 days interest penalty. I’m only interested in cash isa’s and ruled out other types ie: S&S and Lisa etc.

Albermarle

Possible alternative is to put the money in a normal savings account ( not an ISA)

Cash ISA's are largely redundant for most ( not all) savers as a basic rate taxpayer can earn up to £1000 in interest tax free anyway . In any case as normal saving accounts usually pay more interest , then can still be a better deal even if you do have to pay tax .

eskbanker

dustyroad46 said:

rules state that you can only have one cash isa of the same type in any one year

No, the rules are that you can only pay new money into one ISA of each type in any tax year, so if you wish to continue to use cash ISAs, another alternative would be to temporarily pay into a S&S ISA before the end of the tax year but leave the money uninvested, and then transfer it to a cash ISA of your choice (as prior year money, therefore not constraining your options for the next allowance) once 2022-23 starts, in less than three weeks.

Malchester

I know that you can only pay new money into one ISA of each type each year. But if I paid £10000 into an easy access ISA then transferred it to a different provider I assume I can pay a further £10000 into the ISA after transfer whether fixed term or easy access or am I mistaken? I know some providers allow you to split your annual allowance between 2 or more of their ISAs (like Paragon do). 

gwapenut

eskbanker said:

dustyroad46 said:

rules state that you can only have one cash isa of the same type in any one year

No, the rules are that you can only pay new money into one ISA of each type in any tax year, so if you wish to continue to use cash ISAs, another alternative would be to temporarily pay into a S&S ISA before the end of the tax year but leave the money uninvested, and then transfer it to a cash ISA of your choice (as prior year money, therefore not constraining your options for the next allowance) once 2022-23 starts, in less than three weeks.

Do you have any examples where you can pay risk free into a s&s isa by leaving it uninvested in the market? I looked into this a few weeks ago, without too much effort though because I seemed to draw a blank early on.

Albermarle

gwapenut said:

eskbanker said:

dustyroad46 said:

rules state that you can only have one cash isa of the same type in any one year

No, the rules are that you can only pay new money into one ISA of each type in any tax year, so if you wish to continue to use cash ISAs, another alternative would be to temporarily pay into a S&S ISA before the end of the tax year but leave the money uninvested, and then transfer it to a cash ISA of your choice (as prior year money, therefore not constraining your options for the next allowance) once 2022-23 starts, in less than three weeks.

Do you have any examples where you can pay risk free into a s&s isa by leaving it uninvested in the market? I looked into this a few weeks ago, without too much effort though because I seemed to draw a blank early on.

Aj Bell; Vanguard; Fidelity: Hargreaves Lansdown + many more .

eskbanker

Malchester said:

I know that you can only pay new money into one ISA of each type each year. But if I paid £10000 into an easy access ISA then transferred it to a different provider I assume I can pay a further £10000 into the ISA after transfer whether fixed term or easy access or am I mistaken? I know some providers allow you to split your annual allowance between 2 or more of their ISAs (like Paragon do). 

When transferring current year contributions from one ISA to another, it's treated as if you'd paid into the new one all along, so it is indeed possible to transfer and then top up at the new provider.  However, that's a different scenario from OP's, where the existing ISA is a fixed term one that can't be transferred without a penalty, or topped up, whereas in your scenario, there'd be nothing preventing additional contributions to the existing easy-access ISA....