ISA transfer deadline

Misty142

I’m looking to open a Lifetime ISA for the current tax year. Ideally I would like to transfer in £4000 from an old cash ISA which has a poor interest rate and then use a separate £20000 for a new cash ISA. 

I read that it can take up to 15 working days for an ISA transfer to complete. Am I right in thinking that the money would have to have gone into the new LISA prior to the end of the tax year to count, rather than just starting the transfer process by that date? (I.e. it is too late for me this year and I’ll just have to split my allowance as £4000 LISA, £16000 cash ISA)?

Many thanks 

eskbanker

In order to benefit from your £4K annual limit on LISA contributions, this must be completed by the end of the tax year and anything reaching the LISA after that, whether new money or an ISA transfer, will count against the 2024/25 £4K LISA allowance.

Misty142

Thank you - too late for this year then! So I think I’ll put £4000 in a LISA and £16000 in a cash ISA.

For future years, I’m thinking it would be a good idea to keep my full £20000 allowance for investing in cash/stocks and shares ISAs and topping up my LISA with money transferred in from old cash ISAs (so already in the tax-free system). Is this a viable option and, if so, what do others think? I’ve got a few old ISAs paying in the region of 1.2% and, despite best intentions, have never got round to moving them to places with better interest rates once they’ve plummeted.

eskbanker

All might not be lost for this tax year:

1. If you haven't used all of your £20K allowance for 2023/24 and still have £4K allowance (and cash) spare, you can deposit that straight into the LISA
2. Or if you have used your whole allowance but in a flexible ISA, this would permit you to withdraw £4K outside the ISA wrapper and then pay back into the LISA, without being encumbered by transfer delays.

amanda1024

Misty142 said:

Thank you - too late for this year then! So I think I’ll put £4000 in a LISA and £16000 in a cash ISA.

For future years, I’m thinking it would be a good idea to keep my full £20000 allowance for investing in cash/stocks and shares ISAs and topping up my LISA with money transferred in from old cash ISAs (so already in the tax-free system). Is this a viable option and, if so, what do others think? I’ve got a few old ISAs paying in the region of 1.2% and, despite best intentions, have never got round to moving them to places with better interest rates once they’ve plummeted.

or you could transfer the old cash ISAs into new cash/stocks and shares ISAs as well as adding £16k of new money to them, and add £4k to a LISA - main difference is that putting new money is usually fairly quick whereas transfers, particularly if they involve S&S, can take a while. so depends which money you least mind not doing much for a while

Misty142

Thanks for the advice. Am I the only one who doesn’t make time to transfer ISAs to get better rates?? It always sounds like a sensible thing to do, but I never get round to it.

Albermarle

Misty142 said:

Thanks for the advice. Am I the only one who doesn’t make time to transfer ISAs to get better rates?? It always sounds like a sensible thing to do, but I never get round to it.

Not the only one. In fact Millions of people have large amounts languishing in current and savings account paying no or little interest at all.