New to ISA's

Teacake1903

I am new to having ISA's and have a query about what happens when my fixed rate deal comes to an end.

My deal with Virgin comes to an end next week. I intend to transfer this ISA to another provider. I have started this process with them. I had invested £20k which was my allowance from 2023/2034. The maturity value is now £21,208. I have requested that £20k gets transferred to the new ISA provider.

My question is how do I get the £1208 interest ? If I try to withdraw it , I get a warning saying I will be taxed on it . Is this because I am trying to withdraw from the ISA account? 

Virgin say if they haven't heard from me, they will automatically move my money to another low interest specific account. Clearly I have requested where the £20k should go but does the £1208 get moved to this low interest account and I withdraw it from there ?

sparklymarkly

Do you want to take the interest out?
You can transfer the whole balance to another provider- there is no 20k limit for that.

gravel_2

You've misunderstood. You can add 20k per tax year to your ISAs. If you are happy with the new product you have selected then probably just instruct another transfer for the closing balance of the Virgin ISA. You can also, if you have the funds, add a further 20k for this tax year meaning you would have £41,208 in an ISA, earning tax free interest.

Teacake1903

My intention was to always use the £20k to earn annual interest, take out the interest at maturity to spend on a holiday but transfer the £20k into another ISA and earn interest again.

I wasn't going to put £20k a year in as I don't have that money. 

Teacake1903

sparklymarkly said:

Do you want to take the interest out?
You can transfer the whole balance to another provider- there is no 20k limit for that.

Yes. Take out the £1208, spend it, but reinvest the original £20k in an ISA

mebu60

Have you instructed the new provider to transfer-in the £20k at maturity? You don't request Virgin to do this.

Assuming that is the case then the interest should be available in the new Virgin ISA from which it can be withdrawn tax-free. 

Personally I would instruct the new provider to transfer-in from the new Virgin ISA after having made my withdrawal.to mitigate potential complications. 

Teacake1903

mebu60 said:

Have you instructed the new provider to transfer-in the £20k at maturity? You don't request Virgin to do this.

Assuming that is the case then the interest should be available in the new Virgin ISA from which it can be withdrawn tax-free. 

Personally I would instruct the new provider to transfer-in from the new Virgin ISA after having made my withdrawal.to mitigate potential complications. 

I have instructed the new ISA provider to take £20k only from the original ISA . I am assuming that Virgin will then close the original ISA and transfer the remaining money (the interest hopefully) to a low interest account and I then withdraw the interest from there 

mebu60

Teacake1903 said:

mebu60 said:

Have you instructed the new provider to transfer-in the £20k at maturity? You don't request Virgin to do this.

Assuming that is the case then the interest should be available in the new Virgin ISA from which it can be withdrawn tax-free. 

Personally I would instruct the new provider to transfer-in from the new Virgin ISA after having made my withdrawal.to mitigate potential complications. 

I have instructed the new ISA provider to take £20k only from the original ISA . I am assuming that Virgin will then close the original ISA and transfer the remaining money (the interest hopefully) to a low interest account and I then withdraw the interest from there 

That's what should happen. As long as Virgin receive the instruction prior to maturity and action it correctly at maturity. If the new Virgin ISA has a new account number don't be wholly surprised if Virgin transfer all the funds to it then fail the £20k transfer-out. If that happens just withdraw your interest and re-instruct the new provider to transfer-in the £20k from the new Virgin ISA. 

Albermarle

Teacake1903 said:

My intention was to always use the £20k to earn annual interest, take out the interest at maturity to spend on a holiday but transfer the £20k into another ISA and earn interest again.

I wasn't going to put £20k a year in as I don't have that money. 

Are these your only savings ? 
You can earn a certain amount of interest tax free, so you might not need to save within a cash ISA.
This would probably simplify things as there are a lot less rules about transfers etc.

Teacake1903

Albermarle said:

Teacake1903 said:

My intention was to always use the £20k to earn annual interest, take out the interest at maturity to spend on a holiday but transfer the £20k into another ISA and earn interest again.

I wasn't going to put £20k a year in as I don't have that money. 

Are these your only savings ? 
You can earn a certain amount of interest tax free, so you might not need to save within a cash ISA.
This would probably simplify things as there are a lot less rules about transfers etc.

No. I have another £35k which I move around in short term fixes between my wife and myself but stay within the £1k per year limit for each of us. 

gravel_2

Surely it makes sense to use that free cash for holiday (obviously not if it's locked in a fix, but in terms of longer term planning for expenditure...) and build up your ISA cash as much as possible?