With an ISA transfer, people can transfer their money from one provider to another without losing the tax-free benefits.
ISAS make it possible to save or invest up to £20,000 per tax year in savings or stocks and shares, while shielding interest, dividends or capital gains from tax.
Moving old ISAs to a new provider will not count towards this fee as the £20,000 limit only applies to money paid from outside an ISA.
The tax protector: You can think of an Isa as a shield protecting your savings or investments of up to £20,000 from being taxed
There are several reasons why someone wants to transfer their Isa to a new provider.
It could be related to the interest rate, fees, customer service levels, or simply moving from cash to stocks and shares or vice versa.
When it comes to transferring from one cash Isa provider to another, it will most likely be to get a better rate of interest.
Cash Isa rates vary greatly. For example, many of the big banks pay less than 1 percent on their easily accessible cash Isa deals, while some of the best deals offered by challenger banks and building societies pay more than 3 percent.
We recently revealed the best cash Isa rates for money transfers.
Moving shares of Isa to a new provider can make sense for a variety of reasons, from an effort to reduce platform or management costs to an effort to improve performance.
What are the rules when transferring an ISA?
As things stand, you can only open one of each Isa type in any given tax year.
For example, it is not possible to open two investment ISAs in a tax year, but it is possible to open one investment ISA and one cash ISA.
Transferring an ISA does not count as opening a new one. So you can take an Isa to a new provider and still have the option to open another Isa later in that tax year.
Get a better deal: Depositors who hold cash at some of the biggest high street banks are more at risk of getting ripped off with below market rates
You can take all or part of your Isa allowances from previous years with you. However, if you want to transfer your current annual allowance, you must transfer the entire balance.
Under current rules, Isa providers must allow outgoing transfers, but there is no obligation to accept inward transfers. That’s why not all Isa providers do this – so it’s always worth checking before switching.
How transferring an ISA works
Transferring an ISA is a fairly simple process. First open an Isa account with a new provider. Second, let the new provider know that you want to transfer an existing Isa into it.
The new provider will send you an ISA transfer form online or by post. Once completed and returned, your new provider can complete the switch for you electronically or by post.
The process takes no longer than 15 days for cash Isas and 30 days for shares and stock Isas.
When ISAs are transferred, they come with a transfer history form showing how much of the money is from the current year’s plan and how much from previous years.
Be careful when withdrawing money from an Isa
If you used to withdraw money from an Isa, you couldn’t refund that money without it counting towards your current annual Isa subscription.
Now you can legally withdraw and replace money within the same tax year – whether it’s from an old Isa or your current tax year’s Isa, without using up your allowance. However, this benefit is only available on a ‘flexible Isa’.
And not all Isa accounts – be it cash or stocks and shares – fall under this description. So check with your Isa provider before acting.
How do I choose the right Isa to switch to?
This is very easy for those who choose to switch to a cash Isa. Visit This is Money’s best buy charts for cash Isa rates for the best deals.
Our tables are independent and providers don’t have to pay to appear, which is usually the case with major comparison sites.
All banks and building societies are registered with the Financial Services Authority and affiliated to the Financial Services Compensation Scheme, either directly (with protection up to £85,000) or through the passport system (with the compensation limit depending on the bank’s home country). it is €100,000).
When switching to a new Isa cash provider, always keep in mind that not all Isa providers accept wire transfers.
Finding a better deal on your shares of Isa usually means finding a provider that either charges you less or offers a greater investment choice.
DIY investment platforms are a simple and cost-effective way to buy, sell and hold investments and typically allow clients to do so within an Isa package.
When weighing up the right one, it’s important to look at the service it offers, along with handling fees and transaction fees, plus any other additional fees.
We’ve written a comprehensive guide to the best and cheapest DIY investment platforms that can help.
Need to transfer everything at once?
If your existing Isa was opened in the current tax year, you must transfer it in full to the new provider and close the old account.
However, if you transfer Isa funds incurred during a previous tax year, you can transfer as much as you wish without affecting your current annual Isa fee.
Other Isa transfer rules worth knowing
Transfer money to money Isas
If you switch from one monetary Isa provider to another during a tax year, your annual benefit will not be affected as long as you follow the proper transfer process.
Please note that some cash Isa providers charge a fine for leaving. This is particularly the case for fixed-term contracts that have yet to be completed.
It is always worth checking what these costs are so that you can weigh up whether the transfer is cost effective.
Shares and shares transfer to shares and shares Isas
Transferring Isa shares to a new provider generally takes longer than a cash Isa transfer. How long depends on the method you use.
There are two ways to transfer Isa shares. You can opt for a so-called transfer ‘in specie’, or you can sell the investments and transfer them in cash.
In the case of an ‘in specie’ transfer, each share or participation is transferred directly to the new provider.
If you’re happy with all of your current investments, it makes sense since you’ll stay invested throughout the process.
However, it is important to check with your current provider whether there are costs associated with this.
Transferring an ISA does not count as opening a new one, so you can transfer an ISA to a new provider and still have the option to open another ISA later in that tax year
It’s also worth checking with the new provider to see if they can accept any investment you’re planning to transfer. Some offer less choice than others.
The ‘in specie’ transfer usually takes between four and six weeks. However, in some cases it may take longer.
The other option is to sell the investments that make up your Isa portfolio and transfer them in cash to the new provider.
The Isa protection is maintained throughout the process and the new provider reinvests your money according to your wishes.
This option runs the risk of missing out on stock market gains in the meantime, but if you’re looking for a fresh start, it might make sense.
It should normally take less time than the ‘in specie’ transfer, although there are no guarantees.
What about stocks and shares to cash in?
In the past, it was not possible to transfer money from a stock Isa to a cash Isa.
Savers could only transfer money the other way – from cash to stock. But the rules have changed and it’s easy to go either way.
As with transferring money from one money Isa to another, you still need to ask the new provider to make the transfer for you.
It should not exceed 30 calendar days. But don’t be tempted to take out the money and transfer it yourself.
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