ISA Deposit & Allowance

murf_brod_mutts

I have a £20,000 2 year fixed term ISA maturing in a couple of weeks.

If I transfer this amount  to a new ISA does this count as my ISA allowance for 2024-2025 tax year or can I add another £20,000 to this amount. I have not previously used my ISA allowance for this tax year. 

El_Torro

No, it does not use up your ISA allowance. As long as you transfer from ISA to ISA, without taking the money out of the ISA wrapper, you still have your ISA allowance for this tax year.

murf_brod_mutts

What about the interest I have earned, can I take this out from the new ISA without any penalty ? 

El_Torro

If you transfer the whole amount to a fixed term ISA then there will probably be a penalty in taking money out before the fixed term ends. If the money is in an easy access cash ISA then you should be able to take money out whenever you want without penalty. Make sure you check the terms of whatever ISA it is in (or will be in). 

Reed_Richards

murf_brod_mutts said:

What about the interest I have earned, can I take this out from the new ISA without any penalty ? 

Once your fixed term ISA matures, than you can transfer some or all of it to a new ISA or ISAs (following the correct ISA transfer process).  This includes the interest that was earned, which now forms part of the ISA.  So if your £20,000 ISA earned £2000 in interest then on maturity you have a £22,000 ISA.   You can also withdraw whatever amount you like without tax or penalty.  

PRAISETHESUN

murf_brod_mutts said:

I have a £20,000 2 year fixed term ISA maturing in a couple of weeks.

If I transfer this amount  to a new ISA does this count as my ISA allowance for 2024-2025 tax year or can I add another £20,000 to this amount. I have not previously used my ISA allowance for this tax year. 

"Transfer" has a specific meaning in the context of ISAs, but yes, you can transfer previous years subscriptions to a new provider without it counting towards your current year allowance. Since you haven't made any deposits this FY, then you can deposit an additional £20k of new money as well.

murf_brod_mutts said:

What about the interest I have earned, can I take this out from the new ISA without any penalty ? 

Withdrawal restrictions (if any) will depend on the account you make the withdrawal from. You have a few options as I see it:

1) withdraw it from your maturing account before transferring the remaining balance to a new provider

2) partial transfer of the matured balance less interest you wish to retain (not all providers accept partial transfer in)

3) transfer balance + interest to new ISA and then withdraw (withdrawal restrictions on the new account, if any, will be the ones that apply)

In any case, withdrawing the interest from the ISA will mean it is subject to tax moving forward, and will also count towards your ISA limits if you want to redeposit it (unless the ISA you withdrew from was flexible)