How do you transfer to an e-ISA? (The "no transfers from other ISAs allowed" kind)

testpie

Sorry if this has already been addressed elsewhere, but I've been looking at a variety of e-ISAs for a few days now, which all state something along the lines of "Transfers in from other cash ISAs are not permitted".

That said, I then checked with the HMRC site, and was informed that I cannot subscribe to more than one ISA per tax year, but am confused as to how that definition would apply to my situation.

Basically, I have a standard cash ISA that I created in late 2006 and received an interest payment for on the 6th April this year. Since then, I have not paid any money into the account, but the account is still active. If I were to transfer the money out of this ISA, close it, and place said money into a current account, can I then open an e-ISA with another provider and put this money in the e-ISA, or would this technically constitute having subscribed to more than one ISA in a tax year?

10_66

You can transfer existing ISA's to another provider whenever you wish, as long as the new provider permits transfers in (as you have already established, not all providers do permit transfers in). Transferring an existing ISA doesn't have any affect on the current year's contribution. So, for example, you could transfer you existing ISA elsewhere and contribute this year's allowance into the same ISA, or you could transfer to one provider and open a new one with an entirely different provider for this year's allowance. Don't try to close and tranfer the money yourself, if you intend to keep the money in ISA's to carry on earning tax free interest, you need to arrange the transfer from one ISA to another via the new ISA provider.

testpie

10_66 wrote: »

You can transfer existing ISA's to another provider whenever you wish, as long as the new provider permits transfers in (as you have already established, not all providers do permit transfers in). Transferring an existing ISA doesn't have any affect on the current year's contribution. So, for example, you could transfer you existing ISA elsewhere and contribute this year's allowance into the same ISA, or you could transfer to one provider and open a new one with an entirely different provider for this year's allowance. Don't try to close and tranfer the money yourself, if you intend to keep the money in ISA's to carry on earning tax free interest, you need to arrange the transfer from one ISA to another via the new ISA provider.

The problem is that the e-ISAs which don't allow transfers in all seem to have the highest rates that I'm looking for, and I'm still wondering if it's possible to withdraw all the money in my current ISA, place it into a current account and then pay it into an e-ISA which does not allow transfers from all ISAs, without being classed as having subscribed to two ISAs in this tax year.

10_66

I suppose it really depends on whether or not you intend to make any further contributions or whether you just want to move the money you already have and how much you already have in you current ISA. If you do what you want to do, you're limited to putting in £3,600 this tax year. So if you already have, say, £3,000 in your existing ISA, and then close it, withdraw the money into your current account and open a new ISA, you couldn't open it with more then £3,600. If you wanted to add say another £2,000 to the £3,000 you open the new ISA with, you would not be able to do so. That's the advantage of transferring instead of closing and withdrawing, as you could then use the new tax year's allowance which wouldn't be affected by transferring your existing ISA.

testpie

10_66 wrote: »

I suppose it really depends on whether or not you intend to make any further contributions or whether you just want to move the money you already have and how much you already have in you current ISA. If you do what you want to do, you're limited to putting in £3,600 this tax year. So if you already have, say, £3,000 in your existing ISA, and then close it, withdraw the money into your current account and open a new ISA, you couldn't open it with more then £3,600. If you wanted to add say another £2,000 to the £3,000 you open the new ISA with, you would not be able to do so. That's the advantage of transferring instead of closing and withdrawing, as you could then use the new tax year's allowance which wouldn't be affected by transferring your existing ISA.

I have less than £1,000 in the ISA anyway, won't be financially able to contribute anything near £1,000 this tax year, and I'm really just looking to maximise my investment by switching to one of these "no transfer in" ISAs with higher interest rates. Am I definately 100% allowed to close my existing ISA now (within the 2008/09 tax year), transfer the money to a current account, then open a new ISA and put this money in without falling short of the "subscribed ISA per tax year" rule?

Here's the clause from the ISA I'm looking at (which doesn't permit transfers in from other ISAs) just to try and clarify the situation:

Barclays wrote:

From 6th April 2008, in accordance with the ISA Regulations, you are not eligible to apply if you have already subscribed to a Cash ISA, or have already subscribed £7,200 to a Stocks and Shares ISA, either with us or another ISA manager, in the same tax year as you are applying for a Cash ISA with Barclays. See also condition 2.3.

Thanks for your help so far.

debbie42

testpie wrote: »

Am I definately 100% allowed to close my existing ISA now (within the 2008/09 tax year), transfer the money to a current account, then open a new ISA and put this money in without falling short of the "subscribed ISA per tax year" rule?

Just to clarify: your existing ISA was opened late 2006, and this year has only had interest added to it? If so, and you haven't opened another ISA yet this year, then you can close the old one and use the funds to add to a brand new one.

As has already been commented: it will count towards this year's allowance, but this isn't an issue if you weren't planning on using it all anyway.

testpie

debbie42 wrote: »

Just to clarify: your existing ISA was opened late 2006, and this year has only had interest added to it?

As far as I can remember it was late 2006, although the interest payment entry for the ISA on 6th April this year stated the interest spanned "10 April - 6 April"; but either way, I haven't opened any ISAs this year (tax or calendar) or paid into any (other than the interest), but conversely I haven't closed the ISA either.

From what you've said it would appear that I can do what I wanted to (close the old ISA and put the money in the new one), but if for some reason my bank takes a different interpretation, what is the worst they can do with my money? Am I legally still entitled to it back if they declare that I have had two ISAs in one tax year?

Sorry to be so paranoid, but I haven't exactly had the best deals with banking institutions - I practically had to beg Barclays for a Visa Debit card instead of the little-accepted Visa Electron card, and things from then on haven't exactly been peachy.

10_66

If you haven't contributed to an ISA this tax year (interest doesn't count), you can do what you mentioned in your previous posts. Depending on what sort of ISA account you have, there may be some withdrawal penalties (ie loss of x number of days interest), but if it's an instant access account, as a rule, they're usually penalty free. You'd need to check the T&C's.

debbie42

testpie wrote: »

...I haven't opened any ISAs this year (tax or calendar) or paid into any (other than the interest), but conversely I haven't closed the ISA either.

From what you've said it would appear that I can do what I wanted to (close the old ISA and put the money in the new one), but if for some reason my bank takes a different interpretation, what is the worst they can do with my money? Am I legally still entitled to it back if they declare that I have had two ISAs in one tax year?

Just to back up what 10_66 has already posted. What you are doing is perfectly acceptable and also very common. A lot of people (myself included) have more than one cash ISA at some time.

You are allowed so much each tax year, so had you opened one new one each year, and never closed or transferred them, you could have several by now, theoretically. It is completely acceptable within the ISA rules and noone will interpret it any differently.

As it happens, you are intending to close your old one down, but the rules are still the same. Your existing (old) ISA doesn't count at all towards this year's allowance, whether you close it down, transfer it, or open a new one.

The only way it would affect this year's situation is if you'd put new cash into it this tax year. Note: that is new cash, not interest payments (they don't count towards your contributions at all).

testpie

Thanks very much for all the help.