Isa Confusion 18 June 2005 at 10:36AM in ISAs & tax-free savings 4 replies 724 views

Licklelady

I'm sorry if this question has been answered several times already but it would take me ages to read through all the previous posts.
I took out a Maxi Isa 5 years ago and have been paying in regular amounts by standing order. My husband took out a Mini Isa around the same time with a regular standing order. These are still ongoing.
Does this mean then because I have already paid a small amount into my Isa this year that I cannot open a Mini cash Isa as well?
My Maxi Isa has only started to show a profit and I think I would feel happier now with a Mini Cash one instead. If I close it now presumably I won't be able to re-invest into another Isa until next April. Is this correct?
Thanks in advance for any advice you can give me.

dunstonh

You can have a mini equity ISA and a mini cash isa. You cannot have a maxi isa and a mini cash isa in the same year.

If you have paid into your MAXI isa this year, you cannot pay into a mini cash isa this year.

My Maxi Isa has only started to show a profit and I think I would feel happier now with a Mini Cash one instead

You have paid in during a period that there was a stockmarket crash. The units purchased before would have been more expensive and those bough after the stockmarket crash would have been bought nice and cheap. If you sell now, you stand to miss out on the potential of growth that most expect to occur over the coming years. Yes, there is no guarantee of growth but you have done all the hard work and it would be a shame to miss out on the benefits of that.

The last 2 years has seen the UK stockmarket outperform savings accounts and property. Current 12 month statements are showing around 15% growth on average.

If however, you really do feel that stockmarket funds are not appropriate for you, can switch your funds to something that is without closing the ISA. Or you can switch to a different style of stockmarket fund, such as a UK Equity & Income fund.

If I close it now presumably I won't be able to re-invest into another Isa until next April. Is this correct

Yes.

isasmurf

If you want to invest in a Cash ISA, it is possible to do this within a Maxi ISA. However, few Maxi ISA providers offer the Cash component in the Maxi ISA and those that do don't have the best interest rate. But it might be worth putting something into the Cash component of the Maxi ISA this year to take advantage of this years allowance and move it across to a better paying Mini Cash ISA next year.

If you take this route, make sure it is the Cash component you put the cash into, as if you hold cash in the Stocks & Shares component it will be subject to a 20% charge.

Milarky

isasmurf wrote:

If you want to invest in a Cash ISA, it is possible to do this within a Maxi ISA. However, few Maxi ISA providers offer the Cash component in the Maxi ISA and those that do don't have the best interest rate. But it might be worth putting something into the Cash component of the Maxi ISA this year to take advantage of this years allowance and move it across to a better paying Mini Cash ISA next year.

If you take this route, make sure it is the Cash component you put the cash into, as if you hold cash in the Stocks & Shares component it will be subject to a 20% charge.

isasmurf,
Now I'm getting confused. What you are you saying that any 'Maxi' ISA works like this - some offered with separable 'cash', components but most not - is clear enough to me. But Licklelady has an ongoing Maxi ISA. So she can't 'open' [i.e. subscribe to] a different ISA this year. She may transfer all her previous year's subscriptions into a newly selected 'mini' equity ISA - and transfer the rest from this year once the tax year ends. This would give her the option of a cash mini ISA - but only from next year. For this year, unless there is a cash option in her current ISA, I can't see what else she can do?

On the 'cashing out' point, Licklelady could take the view that she she does not intend to subscribe the FULL £7000 in this year anyway. If that is her thinking then she could justify taking out some of the value [if she judges it likely to fall] now and waiting for prices to fall. If values did fall slightly over the next few months, she could then 're-subscribe' the amount withdrawn - as long as she remained within the annual limits. It depends on the type of ISA she has, of course, but this can work for 'CAT' type ISAs [with no offer-bid spread] for those investors with relatively small amounts to save..

Licklelady

Thanks for your advice folks. Like you say, dunstonh, I have done all the hard work so I'll keep dribbling in what I can afford and I'll keep my eye on how the units are performing.
Next March I can re-assess where to go for the following year.
Thanks