Cash ISA Transfer

SeeCents

I'm new here so apologies if I've missed a similar discussion - I'd be happy if somebody would post a link to an alternative thread!

I opened a Cash ISA years ago which was no longer paying a decent rate so I recently opened a new Cash ISA with an alternative provider and transferred the balance as to maintain ISA status.
The old ISA is now at £0 but I'm unsure if the account is still 'open' as it still shows on my Banking app...

I've been saving hard and so am in the fortunate position to require another ISA, but understand I can only open one Cash ISA per financial year; I was thinking of paying in the max £20k into the old ISA and then a further payment after April... the only reason I can't pay into the new one is because only allows withdrawals to a nominated account which means losing ISA status.

Here's the dilemma - when I try to deposit money into the old ISA, I get the message:
"Before making a transfer to this Cash ISA a new ISA declaration is required. This is because you have not subscribed to this account for a whole tax year."

Before I go ahead, does this sound like I'd be, in effect, trying to 'open' an ISA (which I can't legally this year do because of the other one I just opened) or is it merely a legal formality?

The intention would be to then transfer and close this 'refreshed' ISA and carry on with 2 nice new shiny new ones from April'24

I don't really want to wrangle with HMRC, so hopefully the above made some sense!

refluxer

SeeCents said:

I've been saving hard and so am in the fortunate position to require another ISA, but understand I can only open one Cash ISA per financial year

You're not limited to only being able to open one cash ISA each tax year - current ISA rules simply mean that you're only able to pay new subscriptions into one cash ISA at any one time (this restriction is being removed from 6th April this year onwards). You can open as many cash ISAs as you like for transferring in ISAs containing subscriptions from previous tax years.  

Based on what you've said, you'd be fine to pay into the old ISA provided that you haven't paid new subscriptions into another cash ISA since 6th April 2023. The reason you're having to sign a new ISA declaration is that you haven't paid anything into it for a while. IIRC, this is another rule that is being removed from 6th April.

When you said...

SeeCents said:

 the only reason I can't pay into the new one is because only allows withdrawals to a nominated account which means losing ISA status.

...withdrawing from any cash ISA will mean the money loses it's ISA status - can you explain what you mean ? Note that a withdrawal is different to a transfer - it's a transfer that retains the ISA status.

What type of ISA is the new one and what is the rate ? If it's an easy access cash ISA with a good rate, then you should be able to pay your new subscriptions into this, if that's the type of ISA account you want your new money in. If it isn't suitable and/or you can't, then you should be free to open a new one which is suitable - there is no need to keep the old ISA (on the poor rate) open and/or pay into it, as far as I can see.

Albermarle

I'm new here so apologies if I've missed a similar discussion - yes hundreds :)I'd be happy if somebody would post a link to an alternative thread!

There is a sub forum specifically for ISA questions, so would be useful to have a look through threads on that .

ISAs & tax-free savings — MoneySavingExpert Forum

SeeCents

refluxer said:

SeeCents said:

I've been saving hard and so am in the fortunate position to require another ISA, but understand I can only open one Cash ISA per financial year

You're not limited to only being able to open one cash ISA each tax year - current ISA rules simply mean that you're only able to pay new subscriptions into one cash ISA at any one time (this restriction is being removed from 6th April this year onwards). You can open as many cash ISAs as you like for transferring in ISAs containing subscriptions from previous tax years.  

Based on what you've said, you'd be fine to pay into the old ISA provided that you haven't paid new subscriptions into another cash ISA since 6th April 2023. The reason you're having to sign a new ISA declaration is that you haven't paid anything into it for a while. IIRC, this is another rule that is being removed from 6th April.

When you said...

SeeCents said:

 the only reason I can't pay into the new one is because only allows withdrawals to a nominated account which means losing ISA status.

...withdrawing from any cash ISA will mean the money loses it's ISA status - can you explain what you mean ? Note that a withdrawal is different to a transfer - it's a transfer that retains the ISA status.

What type of ISA is the new one and what is the rate ? If it's an easy access cash ISA with a good rate, then you should be able to pay your new subscriptions into this, if that's the type of ISA account you want your new money in. If it isn't suitable and/or you can't, then you should be free to open a new one which is suitable - there is no need to keep the old ISA (on the poor rate) open and/or pay into it, as far as I can see.

Thanks for the detailed reply.

From what you say, having opened a Cash ISA by transferring the balance from the old ISA won't stop me opening a new Cash ISA in the same year subscribed to with 'new' funds? That's great, and pretty much solves my dilemma!

To elaborate on the other points, I've paid £200/month into another ISA which is the Help To Buy ISA, but no new subscriptions to either Cash ISA. This will have to be deducted from the £20k annual limit, I'd imagine.

Re: withdrawing funds, what I meant was the T&Cs of the new ISA (which I'd transferred into) only allows withdrawing to my nominated bank account - I took this to mean that it is the only way I can move any funds, but by your question I presume I would, in fact, be allowed to transfer a portion of the total to a new ISA? I'll have to re-read the T&Cs on moving funds!

The newest ISA is a Easy Access Cash ISA and was one of, if not the, top rate at the time, according to MSE. I don't want to pay any more into it as it's at the limit of the FSCS protection.

I thought the process of transferring everything out of the old, poor rate ISA would automatically close it (like when trabnsferring a phone contract or energy supplier) but do you suggest I contact the bank to formally close it?

Thanks again

refluxer

SeeCents said:
To elaborate on the other points, I've paid £200/month into another ISA which is the Help To Buy ISA, but no new subscriptions to either Cash ISA. This will have to be deducted from the £20k annual limit, I'd imagine.

Yes, you'll need to do that - the £20k ISA limit is shared between all the different ISA types.

SeeCents said:
Re: withdrawing funds, what I meant was the T&Cs of the new ISA (which I'd transferred into) only allows withdrawing to my nominated bank account - I took this to mean that it is the only way I can move any funds, but by your question I presume I would, in fact, be allowed to transfer a portion of the total to a new ISA? I'll have to re-read the T&Cs on moving funds!

Yes, withdrawals and transfers are distinctly different. You should be free to transfer from your new easy access cash ISA to another ISA whenever you like but you'll only be able to transfer a portion of it if the ISA provider allows partial transfers-out - most do in my experience, but not all (Zopa don't, for example). As always, you just need to read the account T&Cs so you know where you stand.

SeeCents said:

I thought the process of transferring everything out of the old, poor rate ISA would automatically close it (like when transferring a phone contract or energy supplier) but do you suggest I contact the bank to formally close it?

Now this one I'm not sure about. All the ISAs I've ever done a full transfer away from have been automatically closed as part of the transfer process. What type of ISA was it ? If it was an easy access ISA without a minimum balance requirement, then that might explain why it's still open.

How long ago did you transfer away from it ? If it was recently, then it may just be that their systems haven't updated yet. If you decide that you don't want to keep it then I'd give it a week or two and if it doesn't disappear, then contact the provider and request it to be closed.