Does a transfer count towards your annual limit?

jules11_2

If I transfer a cash ISA from a previous year to get a better rate of interest, will this count towards my allowance of £3600 in the current tax year?

Mikeyorks

No. It's the same ISA ... you've just transferred it to a different provider and there is no impact whatsoever (either the capital or the closing interest the old provider will add to the transfer total) on your annual allowance.

mister_bojangles

However, I think that if jules transfers £4000 from 20007/08 into the 2008/09 financial year; then withdraws £3200, the maximum that he can pay into the current (2008/09) ISA acct is £400, becasue the maximum to be paid in in any one year is £3600. So, transfers are tricky, really. I hope that I am right. I'm using this forum to seek clarification really. I hope someone affirms what I'm suggesting.

Baldur

mister_bojangles wrote: »

However, I think that if jules transfers £4000 from 20007/08 into the 2008/09 financial year; then withdraws £3200, the maximum that he can pay into the current (2008/09) ISA acct is £400, becasue the maximum to be paid in in any one year is £3600. So, transfers are tricky, really. I hope that I am right. I'm using this forum to seek clarification really. I hope someone affirms what I'm suggesting.

Incorrect, the allowance is per tax year - if £4000 is transferred from previous tax years, as MikeYorks said, it has no impact whatsoever on the current tax year's allowance - if, as per your example, £3,200 of previous tax years' funds was withdrawn the full current tax year's allowance of £3,600 could still be paid in.

If, however, any new money paid in during the current tax year is withdrawn, then it cannot be replaced.

mister_bojangles

Thanks Baldur, but how does the bank differentiate 'old' (transferred) money from 'new money' if you have ONE ISA acct?
e.g. I transfer £6000 into the 2008/09 acct, and keep paying £300 monthly to make up the £3600 limit this year. If I withdraw £5000, how does the bank distinguish what's old from what's new, if you get what I mean?

LittleVoice

I believe they will be counting what you have paid in as fresh funds (this year's allowance as it were) and, separately, what you have transferred.

If you transfer an ISA which includes current year contributions (I think you can do this), then they will know from the sending institution presumably tells that what is "this year's" money.

Mikeyorks

mister_bojangles wrote: »

If I withdraw £5000, how does the bank distinguish what's old from what's new, if you get what I mean?

They don't have to distinguish. The only factor they have to watch is that you don't contribute more than £3600, in total, in the tax year. You can take out what you like .... you just can't put in more than your £3.6k allowance.