Closing one ISA and opening a new one

nzseries1

£££saver wrote: »

Hi

Just to clarify, I still have allowance for this year and have probably only paid in about a half of the allowance, during this year.

I had to withdraw all of the money for a deposit, and want to start saving again, but my current ISA has a poor rate.

I guess what I'm trying to determine is which of the following options are possible:

1) Transfer to a new ISA, despite there being a current zero balance
2) Deposit a small token amount (£1) into the current ISA, so I can then transfer that to the better account
3) Close my current ISA, then open a new one and deposit my remaining annual allowance into it.

I've checked the guide but it doesn't really give advice regarding switching accounts that currently have no balance, and where there is also allowance remaining.

Thanks

So I'm right in saying your current ISA was opened this tax year (on or after April 5 2010)? In that case, option 3) isn't allowed, as you're only allowed one ISA per tax year. In that case, in my opinion you're better off putting all the amount you want to save in your current ISA (might as well be earning poor interest than no interest) and then setting up a transfer with a new ISA provider.

If your current ISA was opened in a previous tax year (before April 5 2010), then just close the old one and open a new one.

EDIT: Looks like I'm wrong. According to this post from another thread:

Paul_Herring wrote: »

An "open ISA" in HMRC's terms is an account that is open and funded with money from the current tax year.

Seems that if there is in fact no balance in your current ISA, then you can indeed just close it and open one elsewhere.

xrjtg

I suspect "and funded" applies here if money has been subscribed and then withdrawn.

The safest course of action if you have the money and want to invest it into an account that accepts transfers in is to put it in the current ISA, then transfer it to the new provider. Failing that, transferring some nominal positive amount rather than zero reduces the probability of hitting obscure glitches in the transfer process.

£££saver

Ended up going down the route of transferring £1 so it automatically closes it, and it's all sorted now.

On a separate issue, how does the interest work when transferring, if it is normally paid annually?

E.g. Say you have 5k in an ISA between Apr-Sep in an account that pays interest every March, but decide to transfer in Oct as the bonus rate expires. Do you get paid the 6 months interest upon closure, or do you lose out on that amount?

david78

£££saver wrote: »

Ended up going down the route of transferring £1 so it automatically closes it, and it's all sorted now.

On a separate issue, how does the interest work when transferring, if it is normally paid annually?

E.g. Say you have 5k in an ISA between Apr-Sep in an account that pays interest every March, but decide to transfer in Oct as the bonus rate expires. Do you get paid the 6 months interest upon closure, or do you lose out on that amount?

The interest earned in the 6 months is added to the balance when the account is closed and will be included with the money transfered.

You do not lose it.:j


However, if you elect to transfer only part of the balance (which you can sometimes do if the amount includes money from previous years -- though most people dont), the account remains open and you dont get the interest earned added until the normal interest date for the account.