Clarifying ISA Allowances available across multiple years

teeepeee

Hi everyone!

I'm not quite clear on ISA Allowances across more than 1 year, and so I wanted to check what the position is - from what I've read I think it's as follows, but it's not quite clear to me and I'd be really grateful if someone could confirm the position definitively, thanks.

Year 1

I open an ISA with Provider A (referred to below as 'Existing ISA')

Year 2

Existing ISA

* After the year anniversary has passed for the Year 1 ISA, the ongoing interest rate offered by Provider A is quite low.

* I open an ISA with Provider B who offer a higher interest rate and transfer my existing ISA to Provider B. This existing ISA continues to qualify as a Year 1 ISA in terms of ISA Allowances.

New ISA

* I also open a new ISA with Provider C to use my separate ISA Allowance for Year 2 and so I now have 2 separate ISAs in play (Year 1 and Year 2).

Year 3 onwards

* I can choose in Year 3 to transfer the Year 1 and / or Year 2 existing ISAs to new Providers where they offer more competitive rates, and I can also open a new ISA for the separate Year 3 ISA Allowance.

Many thanks

Teeepeee

slinger2

Basically correct. You generally need to "transfer" between providers to retain its ISA status. This is initiated by the new provider. You can split old ISAs between 2 or more providers by doing partial transfers or combine them in to 1 if you want. However everything depends on the terms and conditions of the providers. Some don't allow transfers in (only new money). Some don't allow partial transfers out. It's a minefield. Read the small print.

refluxer

Yes, you seem to have got the gist of it - namely that you can pay a maximum of £20k into an ISA (or ISAs) each tax year and, when transferring an ISA originally funded from a previous tax year, the transfer doesn't count towards the current tax year's allowance.

The only comment I would make about this bit though...

teeepeee said:

* I open an ISA with Provider B who offer a higher interest rate and transfer my existing ISA to Provider B. This existing ISA continues to qualify as a Year 1 ISA in terms of ISA Allowances.

...is that there's no need to be concerned with which year an ISA from a previous tax year was originally funded - it's only the current tax year's allowance that you need to distinguish and keep an eye on, to ensure you don't exceed the allowance.
  

teeepeee

slinger2 and refluxer - my apologies for not relying sooner and many thanks for your advice and confirming I'm on the right lines - much appreciated!