ISA question

Bama_Crimson_Tide

 I opened an ISA last year with an interest rate of 5.1% and put the £20k allowance in. However, the interest rate will drop to around 1% this April after one year. 

I want to open another ISA with another £20k and an interest rate of around 5% this April, can i also close the first ISA and transfer the cash in to that new account giving me a total of £40k in the one account?

Is there a maximum amount i can have in total in different ISAs?

lr1277

Yes. Open the new ISA and then get them to transfer in the old ISA. If you take the money out of the old ISA yourself, you will lose all the ISA benefits.

When your new ISA provider transfers the old ISA over to your new ISA, the old ISA is automatically closed. You need to check the T's and C's of the old ISA to see when is the best time to close it then after that ask your new ISA provider to initiate the transfer.

As far as I know, there is no limit on the amount in a single ISA as long as you have kept to all the rules by keeping the money in the ISA all the time. In fact I have heard of ISA millionaires, but I think this was based on a S&S ISA.

friolento

Not all ISAs allow transfers in, and there is at least one which pays a lower interest rate if another ISA has been transferred in. Check the T&Cs of your chosen ISA. 

There is also an ISA board on this Forum with lots of useful information 

PRAISETHESUN

The limit is £20k of new money each financial year. Transferring around existing money is fine, as long as the new provider accepts transfers in. There should be nothing stopping you transferring it such that your new account has £40k final balance.

Just make sure you use the specified ISA transfer process. Don't close the old account and withdraw/redeposit it yourself. Contact your new provider, request a transfer (usually involves filling out a form), and let them arrange it.

Ayr_Rage

NEVER close an ISA unless you actually need the money for a specific purpose, always transfer it.

I doubt there will be many cash ISAs at 5% come April.

There is currently no limit as to total ISA wealth, I have invested every year since tax free accounts were introduced and a few years ago my investments hit the magic million, all in S&S, beating cash my miles.

Aretnap

Yes, what you want to do is fine though as above you need to use the ISA transfer process, so your money goes directly from Old ISA to New ISA. If you withdraw it to your current account and then pay it into New ISA, it will count towards next year's £20,000 limit. (Money is just money; the system for counting subscriptions doesn't distinguish between money that used to be in a different ISA and money that's just arrived in your pay packet.)

There is no limit on the total amount that you can have in an ISA, so long as you don't subscribe (ie pay in) more than £20,000 in any one tax year.

Bama_Crimson_Tide

Thanks everyone for all the replies, i really appreciate the advice.

Albermarle

You would benefit from having a good read through the ISA sub forum.
ISAs & tax-free savings — MoneySavingExpert Forum