What to do with old ISA containing more than £20k

slicendice

My knowledge of ISAs is a bit limited so I'm after a bit of help please. I have an old Post Office ISA that was opened quite a while ago that has had various deposits over the years and has grown to >£50k. It's currently giving just 1.55% interest so I want to set up a new ISA to get better ratees.

What I'm not sure about is how to go about doing this. I know I'd need to transfer the money to the new ISA, but given that it's only possible to save £20k per year, presumably I wouldn't be able to transfer more than £20k into the new ISA? And if so, then that would leave ~£30k in the old ISA and I'm not sure what I would need to do with that? Would I need to close the old ISA completely and transfer the money into some other savings product?

Thanks...

MeteredOut

The £20K limit is only for new money in each tax year, not for existing funds already tax-sheltered in an ISA.

Choose another ISA provider with a better interest rate that allows transfers-in and you can transfer the whole £50K+ into it.

Don't close the old ISA yourself - initiate the transfer via the new ISA provider, and the old ISA will be closed as part of that process.

1.55% is not a good rate.

mebu60

The £20k limit is on new money per tax year. Funds in ISAs from previous tax years do not count.

I am assuming that you are talking about a Cash ISA.

You can open a new cash ISA that accepts transfers-in and transfer the whole balance. It is important that this is done by the new provider. They will ask if you want to do a transfer-in then request all the relevant information from you when you confirm. You do not usually need to put any new money in the new ISA unless you specifically want to. 

slicendice

That's exactly the info I was looking for...thank you both very much for your help

And yes, it's a cash ISA

xylophone

https://www.thisismoney.co.uk/money/saving/article-1583864/Best-savings-rates-Isas-Cash-Isa-accounts-fixed-rate-Isas.html

Choose new provider and go to website.

Click  on  ISA TRANSFER

Follow instructions.

slicendice

Sorry, quick follow-up question...once I've transferred the full balance to the new provider, presumably I'd not be able to pay anything else into it until next tax year?

refluxer

slicendice said:

Sorry, quick follow-up question...once I've transferred the full balance to the new provider, presumably I'd not be able to pay anything else into it until next tax year?

You'll be able to pay into it whatever you have left from your £20k 2024-25 tax year ISA allowance. 

If you haven't paid any new subscriptions into your Post Office ISA (or any other ISAs) since 6th April this year, then you'll have the full £20k allowance available.

As mentioned above, when you transfer an ISA containing subscriptions paid in during previous tax years, it doesn't count towards the current ISA allowance.

mebu60

slicendice said:

Sorry, quick follow-up question...once I've transferred the full balance to the new provider, presumably I'd not be able to pay anything else into it until next tax year?

You can pay up to £20k of new money into ISAs, including this new Cash ISA, in the current tax year. 

slicendice

Right, OK...thanks.

So if I've not actually made any payments into the old ISA this tax year, I could transfer the whole balance across to a new ISA and then, theoretically, pay in £20k straight away (and then not pay anything in until next tax year)?

MeteredOut

slicendice said:

Right, OK...thanks.

So if I've not actually made any payments into the old ISA this tax year, I could transfer the whole balance across to a new ISA and then, theoretically, pay in £20k straight away (and then not pay anything in until next tax year)?

Correct. Open the new ISA with the £20K and initiate the old ISA transfer (which should only take a few days but can sometimes take longer).