Does Transferring a Cash ISA count as starting a new ISA?

BR5500

I opened Cash ISA (1) in March 2024 (23/24 Tax Year) and Cash ISA (2) in May 2024 (24/25 Tax Year). Both ISAs were opened with the maximum amount allowed.

The interest rate of Cash ISA (1) has dropped significantly so I'd like to transfer the full amount (inc interest) to a new Cash ISA with a higher interest rate. I initially thought this would be possible as effectively the Cash ISA (1) is only being transferred to a different ISA, no new funds are being added. However, I've recently read that transferring a Cash ISA in the same tax year where the maximum allowance has already been used (with Cash ISA 2) counts as setting up a new ISA so I won't be able to do this 6th April? Is this is correct, it means that even if the interest rate falls dramatically, we are unable to transfer to a new higher interest rate ISA?

Greatly appreciate advice on whether I'm allowed to transfer Cash ISA (1) to a higher interest ISA? Many thanks in advance.

wmb194

BR5500 said:

I opened Cash ISA (1) in March 2024 (23/24 Tax Year) and Cash ISA (2) in May 2024 (24/25 Tax Year). Both ISAs were opened with the maximum amount allowed.

The interest rate of Cash ISA (1) has dropped significantly so I'd like to transfer the full amount (inc interest) to a new Cash ISA with a higher interest rate. I initially thought this would be possible as effectively the Cash ISA (1) is only being transferred to a different ISA, no new funds are being added. However, I've recently read that transferring a Cash ISA in the same tax year where the maximum allowance has already been used (with Cash ISA 2) counts as setting up a new ISA so I won't be able to do this 6th April? Is this is correct, it means that even if the interest rate falls dramatically, we are unable to transfer to a new higher interest rate ISA?

Greatly appreciate advice on whether I'm allowed to transfer Cash ISA (1) to a higher interest ISA? Many thanks in advance.

Yes, you can do this. You're just transferring your prior year's allowance plus growth to another provider. You can open as many Isas of each type as you like, the only provisio is that between them you don't exceed the per tax year £20k allowance.

Barkin

BR5500 said:

I opened Cash ISA (1) in March 2024 (23/24 Tax Year) and Cash ISA (2) in May 2024 (24/25 Tax Year). Both ISAs were opened with the maximum amount allowed.

[...] 

However, I've recently read that transferring a Cash ISA in the same tax year where the maximum allowance has already been used (with Cash ISA 2) counts as setting up a new ISA so I won't be able to do this 6th April? Is this is correct

No, it's not correct.

You can only put £20k into an ISA per tax year, but transferring funds from previous years is fine.

Where did you read this? 

BR5500

Many thanks for your help - that makes sense as if we couldn't transfer an ISA within the same tax year, we could get trapped with a very low interest rate for the best part of a year.

I initially assumed that it would be fine to transfer from one ISA to another but I was looking at an HMRC forum earlier and it read as though transferring an ISA in the same tax year counts as opening a new ISA, which is blatantly wrong! I've found some of the answers on the HMRC forum to be conflicting in the past so I won't check on there again!

Also, given that we have to give our National Insurance number when transferring ISAs, I'd imagine that it would not be possible to exceed the allowed annual limit as the ISA supplier could check how much has been invested in an ISA in one year from the National Insurance number.

Many thanks again.

Albermarle

I've found some of the answers on the HMRC forum to be conflicting in the past so I won't check on there agai

The Isa subforum on here is a better source of info and worth a read through.

ISAs & tax-free savings — MoneySavingExpert Forum

 I'd imagine that it would not be possible to exceed the allowed annual limit as the ISA supplier could check how much has been invested in an ISA in one year from the National Insurance number.

The ISA provider will not check, but HMRC would probably catch up with you eventually.

BR5500

Many thanks again - when filling out the transfer form with the new ISA provider, the form asks for the account number of the existing ISA - should I put the specific account number of my existing ISA or the main general bank account number of the previous ISA provider (which was initially used to deposit the funds before I was allocated with my own account number)

friolento

BR5500 said:

Many thanks again - when filling out the transfer form with the new ISA provider, the form asks for the account number of the existing ISA - should I put the specific account number of my existing ISA or the main general bank account number of the previous ISA provider (which was initially used to deposit the funds before I was allocated with my own account number)

If you have an ISA account number (you are likely to have one), use that on your transfer form 


On a general point: more often than not, transferring an ISA involves opening a new ISA, as few transfers would occur into an existing one. So you are likely to have read correct information on the HMRC Forum. But that is not an issue because we could always open as many ISAs as we wished, whenever we wished. There used to be more limitations about annual contributions in the past - essentially the only important remaining one now is that you cannot contribute (subscribe) more than £20k new money across all your ISAs in the same financial year. Transfers-in do not count as new money.

checkly

Just jumping in this - I opened a fixed rate isa in March 2024 which matures early next month.  They sent me a letter:

Hi,

You're so close to reaching your savings goal - well done on all the hard work so far.

As your Fixed Rate Cash ISA account *****689 is set to mature, we'll need you to submit your maturity instructions in two weeks when the window opens on 25/02/2025.

You will have three options:

1. Reinvest some or all of your funds into a Fixed Rate Cash ISA account - as a valued customer, you'll be eligible for an exclusive loyalty rate
2. Switch to a Easy Access ISA account
3. Withdraw to your nominated bank account 

I am thinking that there should be a fourth option, basically transferring to a new ISA with a different provider. Am I correct?

wmb194

checkly said:

Just jumping in this - I opened a fixed rate isa in March 2024 which matures early next month.  They sent me a letter:

Hi,

You're so close to reaching your savings goal - well done on all the hard work so far.

As your Fixed Rate Cash ISA account *****689 is set to mature, we'll need you to submit your maturity instructions in two weeks when the window opens on 25/02/2025.

You will have three options:

1. Reinvest some or all of your funds into a Fixed Rate Cash ISA account - as a valued customer, you'll be eligible for an exclusive loyalty rate
2. Switch to a Easy Access ISA account
3. Withdraw to your nominated bank account 

I am thinking that there should be a fourth option, basically transferring to a new ISA with a different provider. Am I correct?

Yes. Many providers will allow you to set a transfer date when your fix matures. If not e.g., Trading212, have it mature into the easy access Isa and then initiate the transfer after the fix has matured. Edit: You always initiate the transfer from the new provider.

Ayr_Rage

checkly said:

Just jumping in this - I opened a fixed rate isa in March 2024 which matures early next month.  They sent me a letter:

Hi,

You're so close to reaching your savings goal - well done on all the hard work so far.

As your Fixed Rate Cash ISA account *****689 is set to mature, we'll need you to submit your maturity instructions in two weeks when the window opens on 25/02/2025.

You will have three options:

1. Reinvest some or all of your funds into a Fixed Rate Cash ISA account - as a valued customer, you'll be eligible for an exclusive loyalty rate
2. Switch to a Easy Access ISA account
3. Withdraw to your nominated bank account 

I am thinking that there should be a fourth option, basically transferring to a new ISA with a different provider. Am I correct?

No.

The current provider CANNOT offer a transfer out, they can only give you those 3 options.

An ISA transfer has to be requested by you via the new ISA provider.

Albermarle

Ayr_Rage said:

checkly said:

Just jumping in this - I opened a fixed rate isa in March 2024 which matures early next month.  They sent me a letter:

Hi,

You're so close to reaching your savings goal - well done on all the hard work so far.

As your Fixed Rate Cash ISA account *****689 is set to mature, we'll need you to submit your maturity instructions in two weeks when the window opens on 25/02/2025.

You will have three options:

1. Reinvest some or all of your funds into a Fixed Rate Cash ISA account - as a valued customer, you'll be eligible for an exclusive loyalty rate
2. Switch to a Easy Access ISA account
3. Withdraw to your nominated bank account 

I am thinking that there should be a fourth option, basically transferring to a new ISA with a different provider. Am I correct?

No.

The current provider CANNOT offer a transfer out, they can only give you those 3 options.

An ISA transfer has to be requested by you via the new ISA provider.

However I think most providers when listing the options will mention somewhere about the possibility of transferring out ?