End of ISA period - bank to transfer it to another

portoman

I've an ISA that matures at the end of Jan. The bank - Barclays - says when this happens it will transfer to a cash ISA or I can choose to transfer it to another ISA.

A few questions

- why isn't Barclays giving the option of transferring to my current account, as the interest will have been paid on the ISA

- if they transfer to another ISA, what happens to my tax free allowance? As I said, it matures in Jan this year and I'll have already used up the tex free allowance, so if they open a new ISA for me - which it will be - will that be taxable as technically they are opening the new ISA with new money. 

I'm unsure what the best thing to do is - given that we're not in a new financial year yet.

Thanks in advance.

eskbanker

portoman said:

- why isn't Barclays giving the option of transferring to my current account, as the interest will have been paid on the ISA

You can do that if you want, Barclays are just making suggestions about what you can do that ivolves staying with one of their ISAs.

portoman said:

- if they transfer to another ISA, what happens to my tax free allowance? As I said, it matures in Jan this year and I'll have already used up the tex free allowance, so if they open a new ISA for me - which it will be - will that be taxable as technically they are opening the new ISA with new money. 

No, you've misunderstood, transferring an ISA doesn't affect your current year allowance, as it's not opening another with new money, that's the whole point, it's using old money.

boingy

You almost certainly don't want to transfer a maturing ISA into your current account because it loses its ISA status and you can't get that status back. You can transfer it into a new or existing ISA and keep the ISA-ness. This does not affect your ISA allowance for this year because it's not new money. The only reason to transfer it to your current account is if you want the money for something else.

I'd suggest transferring it into a new easy access ISA at Barclays in the first instance (for convenience) and then look to transfer it to a new provider at a better rate.

jimjames

portoman said:

- why isn't Barclays giving the option of transferring to my current account, as the interest will have been paid on the ISA

Probably because it's a very bad idea and they'd get deluged with complaints if they allowed customers to do that easily without realising the consequences. ISAs don't mature, they are tax free forever. The rate you are getting may change or a fixed term expire, but the ISA money including interest will still be tax free. If you take it out of the ISA you will lose that tax free status and need to start again. Maybe not a problem if you have £2000 if you account but a big problem if you have £85k in there and can no longer pay it back into an ISA easily.

portoman

boingy said:

You almost certainly don't want to transfer a maturing ISA into your current account because it loses its ISA status and you can't get that status back. You can transfer it into a new or existing ISA and keep the ISA-ness. This does not affect your ISA allowance for this year because it's not new money. The only reason to transfer it to your current account is if you want the money for something else.

I'd suggest transferring it into a new easy access ISA at Barclays in the first instance (for convenience) and then look to transfer it to a new provider at a better rate.

So I can keep transferring existing ISA money into new ISAs but the money isn't classed as new so it doesn't affect any allowance - is that right?

boingy

portoman said:

boingy said:

You almost certainly don't want to transfer a maturing ISA into your current account because it loses its ISA status and you can't get that status back. You can transfer it into a new or existing ISA and keep the ISA-ness. This does not affect your ISA allowance for this year because it's not new money. The only reason to transfer it to your current account is if you want the money for something else.

I'd suggest transferring it into a new easy access ISA at Barclays in the first instance (for convenience) and then look to transfer it to a new provider at a better rate.

So I can keep transferring existing ISA money into new ISAs but the money isn't classed as new so it doesn't affect any allowance - is that right?

Exactly right. You can transfer the ISA every week if you want (assuming the previous transfer has completed!) As long as it goes into another ISA it stays tax free. It does not affect your ISA allowance.

And it will pay you to review your cash ISAs, and other savings, once or twice a year to make sure you are still getting a decent rate because it's really common for providers to tempt you in with a top rate then quietly reduce it a few months later. I review mine in an ad hoc way throughout the year but every January I sit down and review all my finances to see if they are still working as hard as they could be. Then I hassle my wife into doing the same because, even though she is frugal and sensible, she dislikes anything to do with finance so she tends to accumulate spare money in her current account. I try really hard not to nag but it's hard not to nag when there is a five figure sum earning no interest!

Reed_Richards

portoman said:

boingy said:

You almost certainly don't want to transfer a maturing ISA into your current account because it loses its ISA status and you can't get that status back. You can transfer it into a new or existing ISA and keep the ISA-ness. This does not affect your ISA allowance for this year because it's not new money. The only reason to transfer it to your current account is if you want the money for something else.

I'd suggest transferring it into a new easy access ISA at Barclays in the first instance (for convenience) and then look to transfer it to a new provider at a better rate.

So I can keep transferring existing ISA money into new ISAs but the money isn't classed as new so it doesn't affect any allowance - is that right?

Yes, that's right BUT you have to follow the correct procedure.  You need to find the new ISA that you want to transfer to then submit an ISA transfer request to the provider of that ISA.  You should be able to do that now and specify that the transfer takes place when your current ISA matures.  Do not DIY.  If you ask for the money from the matured ISA to be paid into your current account then re-invest it yourself that would be treated as new money and subject to the rules that apply to new ISAs.  

xylophone

Example

I had a Barclays fixed rate ISA that matured a couple of weeks ago. All the capital in the account had been transferred in from an ISA holding subscriptions from previous tax years.

I certainly didn't want to transfer the money in the account to my current account, thereby losing ISA status on the money!

I simply waited for the account to be reclassified as "easy access" then put in a request to Skipton BS to arrange a transfer to my ISA account with them (which also holds subscriptions from previous years).

The money was in the Skipton ISA the following day.

My current year's ISA is held with another provider.