How to transfer from ISA to ISA & LISA & withdraw cash

kazzyb123

Hi
My daughter is turning 18 and she has a junior cash ISA, on her birthday it is moving to another ISA with the same provider.

 The ISA rate on the new account is rubbish so need to move it. We want to move some to a cash LISA and some to a cash ISA and want to take a few hundred out in cash too, is this possible?

Is a LISA a good idea? 

Thanks

masonic

Yes it is possible. Whether or not a LISA is a good idea depends on what she intends to use it for. If she intends to buy a first property in the next few years, and can meet the scheme rules regarding property value etc, then it is probably a good idea. If she intends to use it for retirement, then a cash LISA would not normally make much sense.

Best option would be to find a cash ISA that accepts partial transfers and leave £4k behind to transfer into the LISA if going ahead with that. A withdrawal could be made from the ISA either before or after transferring (assuming she will transfer into an easy access ISA).

kazzyb123

masonic said:

Yes it is possible. Whether or not a LISA is a good idea depends on what she intends to use it for. If she intends to buy a first property in the next few years, and can meet the scheme rules regarding property value etc, then it is probably a good idea. If she intends to use it for retirement, then a cash LISA would not normally make much sense.

Best option would be to find a cash ISA that accepts partial transfers and leave £4k behind to transfer into the LISA if going ahead with that. A withdrawal could be made from the ISA either before or after transferring (assuming she will transfer into an easy access ISA).

Thanks, I don’t suppose you know which cash ISAs accept partial transfers? 

kazzyb123

The LISA would be for a house deposit in the future, I think I’m just worried about losing money if she needs to take it out for any other reason, car etc

masonic

kazzyb123 said:

masonic said:

Yes it is possible. Whether or not a LISA is a good idea depends on what she intends to use it for. If she intends to buy a first property in the next few years, and can meet the scheme rules regarding property value etc, then it is probably a good idea. If she intends to use it for retirement, then a cash LISA would not normally make much sense.

Best option would be to find a cash ISA that accepts partial transfers and leave £4k behind to transfer into the LISA if going ahead with that. A withdrawal could be made from the ISA either before or after transferring (assuming she will transfer into an easy access ISA).

Thanks, I don’t suppose you know which cash ISAs accept partial transfers? 

Chip and Plum do not (though I wouldn't recommend Plum anyway). Trading212 does, I believe. It is usually a case of working your way down the best buy list and checking each provider until you find one.

kazzyb123 said:

The LISA would be for a house deposit in the future, I think I’m just worried about losing money if she needs to take it out for any other reason, car etc

That is a concern. It is one reason to delay contributions until late in each tax year, and having enough outside the LISA to cover these sort of things.

kazzyb123

@masonic I’ve had a quick look and it looks like isa to isa or isa to Lisa transfers take 2-3 weeks. Is there any reason why we can’t withdraw all of it to a normal savings account and then deposit it into Lisa & isa which is quicker? I know she will lose the tax benefit for this year but she doesn’t pay any tax anyway.
I was hoping to open and pay into a LISA before the end of this tax year but money box has a cut off date of 28th Feb. A lot of the others on the list don’t accept transfers in from ISAs and even if they do it would take too long. 

masonic

kazzyb123 said:

@masonic I’ve had a quick look and it looks like isa to isa or isa to Lisa transfers take 2-3 weeks. Is there any reason why we can’t withdraw all of it to a normal savings account and then deposit it into Lisa & isa which is quicker? I know she will lose the tax benefit for this year but she doesn’t pay any tax anyway.
I was hoping to open and pay into a LISA before the end of this tax year but money box has a cut off date of 28th Feb. A lot of the others on the list don’t accept transfers in from ISAs and even if they do it would take too long. 

The only thing she would lose is part of her ISA allowance for this tax year. If she won't need more than £16k of her allowance then a manual transfer into the LISA would be the straightforward option. For the ISA, it should be much easier and quicker to use the transfer process. And necessary if she has more than £20k saved in the original ISA.

sammy_zammy

“I know she will lose the tax benefit for this year but she doesn’t pay any tax anyway.”

Her not paying tax doesn’t make losing the tax benefit irrelevant. It also means that it will contribute to the 20k ISA limit, even though it’s already in an ISA. So make sure you won’t end up putting more than 20k total into ISAs this tax year, including money you’ve already contributed and money you put back in now, or you will be in breach of the ISA conditions.

kazzyb123

sammy_zammy said:

“I know she will lose the tax benefit for this year but she doesn’t pay any tax anyway.”

Her not paying tax doesn’t make losing the tax benefit irrelevant. It also means that it will contribute to the 20k ISA limit, even though it’s already in an ISA. So make sure you won’t end up putting more than 20k total into ISAs this tax year, including money you’ve already contributed and money you put back in now, or you will be in breach of the ISA conditions.

Oh yes, she has under 10K which was paid in during 2023/24 tax year so am I right in thinking if I take it all out to a normal savings account, then transfer 4K to LISA and put rest in ISA that’s Ok because that’s paying on less than 10K this year 2024/25? 

The next 4K would then be moved from ISA to LISA next tax year 2025/26.

Tembo will take payments into a LISA up until April 5th for this tax year

masonic

Yes, if she's only got £10k of ISA savings in total and hasn't been using her 2024/25 allowance, then there is no issue doing it all manually.