Transferring from Stocks and Shares ISA to Lifetime ISA

poppy10_2

Hi, I have a Stocks and Shares ISA and a Lifetime ISA held with AJ Bell/YouInvest.

Each year I transfer £4000 from my Stocks and Shares ISA into my Lifetime ISA, in order to benefit from the govt top-up. YouInvest only allow cash transfers so I first sell £4k worth of funds within my Stocks and Shares ISA, and then transfer that cash into the Lifetime ISA, where I repurchase the funds. This has always worked fine for me for the past few years.

When I have tried to do it this year, I get the message:

HMRC rules mean that you are only able to transfer the full value of your stocks and shares ISA to your Lifetime ISA. The transfer must be in cash only. As your stocks and shares ISA currently includes investments we are unable to transfer it. If you wish to transfer all your stocks and shares ISA to your Lifetime ISA, you must only hold cash in your stocks and shares ISA.

I have never had this message before. Is this a real HMRC rule? It doesn't seem to make sense that you have to transfer the entire value of a stocks and shares ISA into a Lifetime ISA. It would mean I would have to liquidate my entire Stocks and Shares ISA, withdraw all but £4000 of the cash and then I would be able to transfer the remaining £4000 to my Lifetime ISA. Is this correct or are YouInvest getting it wrong?

Notepad_Phil

I don't know about the rules of what you're doing, but if necessary could you not just withdraw the £4000 from the S&S ISA and then add it to the Lifetime ISA?

masonic

This is not a real HMRC rule, unless the £4k you are transferring includes money paid in during the current tax year. Otherwise it is a provider rule and should be labelled as such. The provider is entitled to impose such a rule, but should not deceive as to its origin. As stated above, you can simply withdraw £4k and pay it into your S&S ISA. This would, however, leave you with only £16k allowance in the current tax year.

poppy10_2

Notepad_Phil said:

I don't know about the rules of what you're doing, but if necessary could you not just withdraw the £4000 from the S&S ISA and then add it to the Lifetime ISA?

That would reduce the amount I am able to pay into my stocks and shares isa.

I have another Stocks and Shares ISA with Vanguard that I normally max out with £20k each year. The £4000 that I transfer from my YouInvest S&S ISA to my Lifetime ISA doesn't affect this, as transfers don't count as new subscriptions.

If I were to withdraw 4000 from the Youinvest S&S ISA and add it to the lifetime ISA it would be counted as £4000 of new subscriptions and would reduce the amount I am able to save into my Vanguard ISA to £16,000.

poppy10_2

masonic said:

This is not a real HMRC rule, unless the £4k you are transferring includes money paid in during the current tax year. Otherwise it is a provider rule and should be labelled as such. The provider is entitled to impose such a rule, but should not deceive as to its origin. As stated above, you can simply withdraw £4k and pay it into your S&S ISA. This would, however, leave you with only £16k allowance in the current tax year.

Thanks. I've found this guidance on the official gov.uk site

https://www.gov.uk/guidance/transfer-lifetime-isas-between-managers

Transfer from an ISA to a Lifetime ISA and partial transfers

Investors can transfer previous year payments to a Lifetime ISA from a different type of ISA (for example, from a cash ISA to a Lifetime ISA). The value transferred to the Lifetime ISA will count towards the £4,000 annual Lifetime ISA payment limit but not the overall ISA payment limit for the tax year.

Partial transfers from previous year’s ISA payments are permitted however when the transfer includes current year payments, this must be transferred in full. This will count towards the overall ISA payment limit.

I think YouInvest are getting confused with the second paragraph when they state transfers have to be made in full. This only applies if you have paid into the S&S ISA in the current tax year. I haven't added any new money to my YouInvest ISAs for years, they only contain previous years subscriptions.

masonic

poppy10_2 said:

masonic said:

This is not a real HMRC rule, unless the £4k you are transferring includes money paid in during the current tax year. Otherwise it is a provider rule and should be labelled as such. The provider is entitled to impose such a rule, but should not deceive as to its origin. As stated above, you can simply withdraw £4k and pay it into your S&S ISA. This would, however, leave you with only £16k allowance in the current tax year.

Thanks. I've found this guidance on the official gov.uk site

https://www.gov.uk/guidance/transfer-lifetime-isas-between-managers

Transfer from an ISA to a Lifetime ISA and partial transfers

Investors can transfer previous year payments to a Lifetime ISA from a different type of ISA (for example, from a cash ISA to a Lifetime ISA). The value transferred to the Lifetime ISA will count towards the £4,000 annual Lifetime ISA payment limit but not the overall ISA payment limit for the tax year.

Partial transfers from previous year’s ISA payments are permitted however when the transfer includes current year payments, this must be transferred in full. This will count towards the overall ISA payment limit.

I think YouInvest are getting confused with the second paragraph when they state transfers have to be made in full. This only applies if you have paid into the S&S ISA in the current tax year. I haven't added any new money to my YouInvest ISAs for years, they only contain previous years subscriptions.

I doubt that they are getting confused with that statement, as its meaning is crystal clear (and as you say, they've done it in previous years, and this is not a new rule). The next step would be to request them to specify exactly which HMRC rule they believe to restrict them in the way they have stated, and if this rule, simply quoting it back to them with some highlighting should have the desired effect, or force them into disclosing the real reason they won't do it this time.

It should be noted that, at one time, they claimed they could not transfer in a LISA from someone over the age of 40 because of HMRC rules, but when challenged they later clarified it was an internal decision because of technical limitations in their electronic transfer process (which checks DOB and says no).

Notepad_Phil

poppy10_2 said:

Notepad_Phil said:

I don't know about the rules of what you're doing, but if necessary could you not just withdraw the £4000 from the S&S ISA and then add it to the Lifetime ISA?

That would reduce the amount I am able to pay into my stocks and shares isa.

...

Well there was talk about liquidating all but £4,000 of the ISA, so thought I should at least mention it.

poppy10_2

Ran into the same message this year and realised I never updated this thread. The issue resolves itself after a couple of weeks. Seems to be an issue with the money not having been cleared yet after selling stocks in the main ISA. I was able to transfer the £4k after waiting a couple of weeks