Tax Efficient Way to Transfer ISA?

Bluebird_Sailor

I have £40k in a Tesco Flexible Instant Access Cash ISA. This is made up of £10k deposited this 2025/26 year and £30k deposited in previous tax years. If I transfer £25k to another provider to invest in a stocks and shares ISA, will all the £25k still be in an ISA tax free wrapper? If not, please what’s the most tax efficient way of doing the transfer?

molerat

The only way to do this is to open a S&S ISA and tell the provider to transfer the funds in from the cash ISA, you cannot do the transfer yourself as that would remove it from the tax free wrapper and turn it into "new money".

sausage_time

Bluebird_Sailor said:

I have £40k in a Tesco Flexible Instant Access Cash ISA. This is made up of £10k deposited this 2025/26 year and £30k deposited in previous tax years. If I transfer £25k to another provider to invest in a stocks and shares ISA, will all the £25k still be in an ISA tax free wrapper? If not, please what’s the most tax efficient way of doing the transfer?

So long as you ask your new provider to initiate the partial transfer your £25k will remain in the tax free wrapper.

https://www.gov.uk/individual-savings-accounts/transferring-your-isa

eskbanker

Bluebird_Sailor said:

I have £40k in a Tesco Flexible Instant Access Cash ISA. This is made up of £10k deposited this 2025/26 year and £30k deposited in previous tax years. If I transfer £25k to another provider to invest in a stocks and shares ISA, will all the £25k still be in an ISA tax free wrapper? If not, please what’s the most tax efficient way of doing the transfer?

molerat said:

The only way to do this is to open a S&S ISA and tell the provider to transfer the funds in from the cash ISA, you cannot do the transfer yourself as that would remove it from the tax free wrapper and turn it into "new money".

Not strictly the only way - the £10K deposited this year can be withdrawn from the flexible ISA and redeposited into a new one without losing its tax-free status (or affecting current year contribution allowance), which could be significantly faster than transferring provider to provider directly, but the rest needs to use that latter method.

sausage_time

If there are no plans to pay your remaining £10k for this year into an ISA, you could withdraw £20k from your existing ISA and pay this into the new ISA - comprising £10k of existing ISA cash and £10k "new" money.  Then kick off a transfer of £5k.

Woodstok2000

sausage_time said:

If there are no plans to pay your remaining £10k for this year into an ISA, you could withdraw £20k from your existing ISA and pay this into the new ISA - comprising £10k of existing ISA cash and £10k "new" money.  Then kick off a transfer of £5k.

Can you? If youve already used 10k of thisbuears allowance, wouldn't depositing 20k of 'new' money take you over the annual limit?

eskbanker

Woodstok2000 said:

sausage_time said:

If there are no plans to pay your remaining £10k for this year into an ISA, you could withdraw £20k from your existing ISA and pay this into the new ISA - comprising £10k of existing ISA cash and £10k "new" money.  Then kick off a transfer of £5k.

Can you? If youve already used 10k of thisbuears allowance, wouldn't depositing 20k of 'new' money take you over the annual limit?

As above, current year money withdrawn from a flexible ISA can be redeposited in another ISA (in the same tax year) without counting as new money.

Woodstok2000

eskbanker said:

Woodstok2000 said:

sausage_time said:

If there are no plans to pay your remaining £10k for this year into an ISA, you could withdraw £20k from your existing ISA and pay this into the new ISA - comprising £10k of existing ISA cash and £10k "new" money.  Then kick off a transfer of £5k.

Can you? If youve already used 10k of thisbuears allowance, wouldn't depositing 20k of 'new' money take you over the annual limit?

As above, current year money withdrawn from a flexible ISA can be redeposited in another ISA (in the same tax year) without counting as new money.

Ah, I thought the new isa would have to be flexible too - so even depositing into a stocks and shares isa re-uses the same allowance?

maman

Sorry to be pedantic but some more recent posts on the thread say things like 'withdraw xxx  from an ISA'. It's essential that OP instructs his chosen provider to do this. If he takes it out himself then he loses the tax free wrapper. 

surreysaver

maman said:

Sorry to be pedantic but some more recent posts on the thread say things like 'withdraw xxx  from an ISA'. It's essential that OP instructs his chosen provider to do this. If he takes it out himself then he loses the tax free wrapper. 

It depends. If the OP withdraws money from a flexible ISA that was paid in since the beginning of this tax year, that wasn't originally from an older tax year, then you can pay that back into any old ISA before the end of this tax year.

Angelica123

maman said:

Sorry to be pedantic but some more recent posts on the thread say things like 'withdraw xxx  from an ISA'. It's essential that OP instructs his chosen provider to do this. If he takes it out himself then he loses the tax free wrapper. 

Not necessarily. The flexible ISA rules have changed. The money which was deposited in this tax year, could be withdrawn and replaced in any ISA (as long as it's done in the same tax year).  So OP could legitimately withdraw 10k (this current tax year's money) and deposit it with any ISA provider without affecting their ISA allowance. However, they could not do this with previous tax year"s money.