Fixed Rate Cash ISA advice

Nkay11

Hi guys, im pretty new to Cash ISA’s and this year was the first time I’ve opened one. I’m still a bit confused with the rules around them going forward so just wanted some advice for those who know better.

I opened a 1 year fixed rate cash ISA in August 2023 and deposited £20,000 which I understand is the max amount per tax year. As I understand it, this resets in April and you then have another year to deposit another £20,000?

So my question is, when my cash ISA matures in August with the added interest, what are my options in terms of reinvesting? Am I allowed to transfer all of the money in that ISA which will be around £21,000 to a brand new ISA and then add another £20,000 to it? So basically I’ll have £41,000 in it and be able to get the fixed rate at whatever that is at the time? Or have I misunderstood this completely and I can only open a new one with £20,000?

Also, if I decided to just put that money back into my normal bank, would I be penalised?

Sorry if these seem silly questions, I’m just trying to get my head around it all.

Thanks in advance!

Peter999_2

You are correct.  You would end up with £41,000 in the ISA.    I have over £60,000 in one of my ISAs which I've just moved to new ISAs over the years.   You just have to be a bit careful when you get close to the FCSC £85,000 limit.  At that point you can just open a totally new ISA with your next £20,000.

El_Torro

You can invest another £20k in the new tax year. The new tax year begins on the 6th of April. 

You can transfer any money that is already in an ISA to another ISA. Some ISA providers only accept new money though, not transfers. You'll need to check the terms of the account you wish to transfer to. 

If you take money out of a Cash ISA you won't be penalised, assuming you do it after the fixed term (if you have a fixed term Cash ISA, some are easy access). 

Ocelot

I opened a 1 year fixed rate cash ISA in August 2023 and deposited £20,000 which I understand is the max amount per tax year. As I understand it, this resets in April and you then have another year to deposit another £20,000?

Yes

So my question is, when my cash ISA matures in August with the added interest, what are my options in terms of reinvesting? Am I allowed to transfer all of the money in that ISA which will be around £21,000 to a brand new ISA and then add another £20,000 to it? So basically I’ll have £41,000 in it and be able to get the fixed rate at whatever that is at the time? Or have I misunderstood this completely and I can only open a new one with £20,000?

The 21k (including interest) will remain tax-free indefinitely unless you withdraw it. Most ISAs don't allow you to add to an existing fixed rate ISA months later (although a tiny proportion apparently do). However, you can still add another 20k to a new ISA in the new (and every subsequent) tax year (unless a future Government decides to axe them). Your choice of ISA will be restricted to what rates are available at the time. From 6/4/24 you can open more than one cash ISA per tax year, subject to a maximum 20k annual limit in total.

Also, if I decided to just put that money back into my normal bank, would I be penalised?

You would not lose the accrued tax-free benefits of the ISA (ie would not have to pay any tax on it), but would lose the tax-free benefits for and interest on the amount withdrawn going forward.

Nkay11

Many thanks for your replies!

So basically I could open a new cash ISA and deposit £20,000 then transfer all of the funds from this current ISA I have once it matures? Or would I transfer first then add £20,000 to it?

Abertawe25

IN MY EXPERIANCE YOU CAN OPEN A CASH ISA EITHER WITH A TRANSFER OR CASH DEPOSIT OR BOTH I DONT THINK IT MATTERS WHICH COMES FIRST INTO THE ACCOUNT,BE CAREFULL BECAUSE A LOT OF PROVIDERS ONLY GIVE YOU A MONTH TO TRANSFER INTO THE NEW ISA IF IT IS A 12MONTH FIXED ISA.

Albermarle

Abertawe25 said:

IN MY EXPERIANCE YOU CAN OPEN A CASH ISA EITHER WITH A TRANSFER OR CASH DEPOSIT OR BOTH I DONT THINK IT MATTERS WHICH COMES FIRST INTO THE ACCOUNT,BE CAREFULL BECAUSE A LOT OF PROVIDERS ONLY GIVE YOU A MONTH TO TRANSFER INTO THE NEW ISA IF IT IS A 12MONTH FIXED term ISA of any length.

Hi Welcome to the forum. No need to use all Capitals for your posts !
Made a slight amendment to your post .

OP - Around 4 weeks before your fixed term comes to an end you should be contacted by the provider asking what you want to do, and will give you some options. Such as
Roll it over into a new fixed term with the same provider ( or a different term)
Withdraw it
Transfer it to a new provider.
If you do nothing then usually it goes into an easy access account, but not always.

Nkay11

Thanks for all your advice. Much appreciated. 

badger09

Just for clarity. 

To preserve the tax free ISA status, any transfers must be arrange by the receiving ISA provider. 

art123_2

I have £20,000 in a fixed rate cash ISA which matures on 1st November.  I am planning to open another fixed rate ISA for 24/25 with £20000 of new money, around the middle of October, around 2 weeks before it matures, and then transfer the maturing isa across. However, I want to part transfer only the £20000 capital, and keep the accrued interest for myself.  I have asked my provider if they allow this and if they would transfer the interest to my nominated bank account, but they said that it would be transferred into a easy access ISA on the maturity date, and I could then withdraw it.  I don't want to break any ISA rules so I want to be 100% sure that the interest that is going to be deposited into this easy access cash ISA, even for a day before I withdraw it, doesn't have any affect on my entitlement to open and deposit £20000 into the new ISA, previously mentioned, for 24/25.   I've read all the small print, but still can't find an answer to this, and I'm finding this all very hard to understand.  I would be grateful if anyone that has come across this situation before, could help me try and understand this.  Thanks in advance.

eskbanker

art123_2 said:

I have £20,000 in a fixed rate cash ISA which matures on 1st November.  I am planning to open another fixed rate ISA for 24/25 with £20000 of new money, around the middle of October, around 2 weeks before it matures, and then transfer the maturing isa across. However, I want to part transfer only the £20000 capital, and keep the accrued interest for myself.  I have asked my provider if they allow this and if they would transfer the interest to my nominated bank account, but they said that it would be transferred into a easy access ISA on the maturity date, and I could then withdraw it.  I don't want to break any ISA rules so I want to be 100% sure that the interest that is going to be deposited into this easy access cash ISA, even for a day before I withdraw it, doesn't have any affect on my entitlement to open and deposit £20000 into the new ISA, previously mentioned, for 24/25.   I've read all the small print, but still can't find an answer to this, and I'm finding this all very hard to understand.  I would be grateful if anyone that has come across this situation before, could help me try and understand this.  Thanks in advance.

Once the current fix matures and the money is moved into an easy access one, you can withdraw whatever you like before instructing the other provider to transfer the (remaining) full balance, none of which affects your ability to fund the new 24/25 ISA with £20K.  Although this does have some similarity to OPs situation, yours would be better in its own thread if you wanted to discuss further....