ISA withdrawal vs transfer

chinadog1

HI,
I'm new to this forum and also not very good with ISA rules. Please can you help?

I have an existing easy access ISA with the NatWest which I haven't used for a few years (it just collects interest each year) and opened another recently with YBS in order to transfer some funds to keep the maximum in the NW ISA to below £85,000.
They way I did this was to withdraw £2000 from the old NW ISA to my current account, then deposited this £2000 straight into my YBS ISA on opening. This was late September 2025.
I have just realised that I should maybe have asked the YBS to do a transfer for the £2000, but I didn't realise this was the correct way at the time.
Now that the YBS ISA is open, what are the tax implications of what I have done?  Will I have to pay tax on the £2000 which is now in the YBS ISA, even though it was only sat in the current account for a day or so?

Has this done any harm to the old NW ISA also?

Any help would be appreciated.

Best wishes to all.

  

masonic

All it means is you now have £18,000 ISA allowance remaining in this tax year. If you had asked YBS to transfer you'd still have £20,000. Assuming of course you have not paid into any other ISAs.

eskbanker

No tax liability, but the £2K will count towards your 2025/26 ISA contribution allowance of £20K - have you paid into any other ISAs since 6 April?

Sounds like it would be worth reviewing your finances from a wider perspective, as I daren't think what interest rate an ancient easy access product will be paying, so on £85K you may be missing out on substantial earnings....

Albermarle

I'm new to this forum and also not very good with ISA rules. Please can you help?

If you spend some time reading through the forum, you will become much better informed about ISA rules.

Also as per the previous post, you may find it useful to see what current easy access ISA rates are.
Compare Easy Access ISAs | Best rate currently 4.51% AER

chinadog1

HI,
Thanks for the comments, in the 2025/2026 year I have paid £2000 into a Virgin Money ISA and now this £2000 into the YBS ISA, so maybe my total is now £4000, leaving £16,000?
I was a little nervous that the withdrawal instead of a transfer would create a tax liability, but thankfully that's not the case.
For the VM ISA I'm getting 4.05% interest, and for the YBS one it's around 3.75%.

Am I short changing myself?

eskbanker

chinadog1 said:

HI,
Thanks for the comments, in the 2025/2026 year I have paid £2000 into a Virgin Money ISA and now this £2000 into the YBS ISA, so maybe my total is now £4000, leaving £16,000?
I was a little nervous that the withdrawal instead of a transfer would create a tax liability, but thankfully that's not the case.
For the VM ISA I'm getting 4.05% interest, and for the YBS one it's around 3.75%.

Am I short changing myself?

The question was about the £85Kish that you say you've had languishing in an old easy access account, just for the interest - what rate is that paying?

sheramber

chinadog1 said:

HI,
Thanks for the comments, in the 2025/2026 year I have paid £2000 into a Virgin Money ISA and now this £2000 into the YBS ISA, so maybe my total is now £4000, leaving £16,000?
I was a little nervous that the withdrawal instead of a transfer would create a tax liability, but thankfully that's not the case.
For the VM ISA I'm getting 4.05% interest, and for the YBS one it's around 3.75%.

Am I short changing myself?

I thought you could only pay into one cash ISA in a year.

eskbanker

sheramber said:

chinadog1 said:

HI,
Thanks for the comments, in the 2025/2026 year I have paid £2000 into a Virgin Money ISA and now this £2000 into the YBS ISA, so maybe my total is now £4000, leaving £16,000?
I was a little nervous that the withdrawal instead of a transfer would create a tax liability, but thankfully that's not the case.
For the VM ISA I'm getting 4.05% interest, and for the YBS one it's around 3.75%.

Am I short changing myself?

I thought you could only pay into one cash ISA in a year.

That rule was abolished eighteen months ago.

chinadog1

I think the NW ISA pays about 2.75%

eskbanker

chinadog1 said:

I think the NW ISA pays about 2.75%

So even if you just transferred it all to YBS, rather than just £2K, you'd be up by £850 a year, or a bit more with VM, or if you used market-leading products (see article linked above), the annual increase would be in four figures! 

Struggling to understand why you'd identify and open better products but leave the vast bulk of your money in a lower-paying account?

winkowinko

chinadog1 said:

I think the NW ISA pays about 2.75%

Your priority is to sort this out ASAP, and make sure you do it via a transfer, and not a withdrawal/deposit into a new ISA, like you have recently done with the 2x£2000.