Isa Transfer

bestoffer

Hi I am completely confused as to Isa rules.I have put money into my first flexible cash Isa this year and recently withdrew the full amount to deposit into another flexible Isa with a better interest rate. I did not use the transfer method but my new provider has told me that because they are both flexible it is allowed. I know that rules have changed and we can now deposit into multiple Isa's in the same year but I still am not sure if I am within the rules.

eskbanker

No, although the new rules were relaxed to allow funding of multiple ISAs of the same type in the same year, the flexibility provisions were actually tightened, so flexibly-withdrawn money now has to be returned to the same ISA.

Depositing it into another one would have been treated as a new subscription, which is only OK if you had enough remaining headroom in your annual allowance - did you?

Ayr_Rage

Please specify the amounts.

If it was the full £20,000 you have broken the rules.

eskbanker

Ayr_Rage said:

Please specify the amounts.

If it was the full £20,000 you have broken the rules.

....or indeed any amount over £10K!

bestoffer

No I transfered the full £20000. However a lot of that money was from past years savings and I have only saved around £6000 this year. Would that give me some leeway as regards to paying tax on it?

bestoffer

So I need to transfer the money back to the original Isa?

jimjames

bestoffer said:

So I need to transfer the money back to the original Isa?

Yes. The advantage is that all the money from previous years can be redeposited in the flexible ISA and won't impact your allowance for this year.

However if you took out £20k from your flexible ISA consisting of £6k new and £14k old money and then put that into a new ISA you have exceeded your allowance for this year by £6k in that new ISA. Whether HMRC will bother to take any action if you have returned the money to the original ISA is open but at least you've then not got 2 active ISAs with that money in and have legitimately retained your previous year subs.

bestoffer

Not sure what Ayr Rage means by anything over £10000. Does that mean I can only put back £10000 to the original Isa?

QrizB

bestoffer said:

Not sure what Ayr Rage means by anything over £10000. Does that mean I can only put back £10000 to the original Isa?

The annual limit is £20k.

If you'd only put £10k into the first one, taken it all out and then put it into the new one, your total deposits for the year would have been £10k (old ISA) + £10k (new ISA) = £20k and you wouldn't have broken any rules.

bestoffer

Thanks Qrizb but does that mean I can only put £10000 back to my orignal Isa or all the £20000 ?

Northern_Wanderer

bestoffer said:

Thanks Qrizb but does that mean I can only put £10000 back to my orignal Isa or all the £20000 ?

You can put it all back into the ISA you took it out from and it will repay what you took out since it is flexible. You must do this before the end of this tax year however.