If you have an ISA or ISAs, and are thinking about moving to a new provider, you might think the process will be complicated and time-consuming. The good news is that transferring an ISA should be a relatively quick and easy process – especially when moving between two online providers. The key is to follow the rules to the letter to ensure the funds remain under the protection of the tax wrapper.
Carry out your transfer carefully in accordance with the ISA transfer rules, and your savings will maintain their tax-free status, without you facing any levy on your income – or any capital gain. Just remember, the overall annual allowance is currently £20,000, and is due to remain frozen at this level into the new tax year beginning on April 6, 2024.
How many ISAs can I have?
Under current rules, you are permitted to contribute to four different types of ISA in one tax year – cash ISAs, Stocks and Shares ISAs, Lifetime ISAs (LISAs), and innovative finance (IFISAs). You can have each of these with separate providers if you so wish.
But what you need to realise is that although you can have lots of different ISAs, you can currently only open – and contribute to – one of each type in a tax year, within your annual allowance. You could, for example, slot away £6,000 into a cash ISA, £10,000 into a Stocks and Shares ISA, and £4,000 into a LISA. (Remember that £4,000 is the maximum for a LISA).
Or, you might have £11,000 in a cash ISA, £2,000 in a Stocks and Shares ISA, £4,000 in a LISA, and £3,000 in an IFISA, and so on and so forth. As a saver, you need to be aware that the rules are changing from the start of the new tax year (April 6, 2024). From this point, you will be allowed to open multiple ISAs of the same type without losing your ISA allowance. The overall ISA allowance stays the same at £20,000.
Reasons to want to make an ISA transfer
There are a host of reasons why you might want to move your ISA to a new provider. You might, for example, want to secure a better return. The only way to take advantage of a higher rate is by making a transfer.
Or, it could be the case that your original choice of Stocks and Shares ISA is no longer the one best-suited to your needs and investment goals. You may, for example, want a platform with lower fees. Alternatively, you may wish to consolidate multiple investment pots. By moving several ISAs into one place, this can help you keep tabs of the performance and value of your holdings. It can also reduce the risk of you losing track of where you’re holding your money.
How to transfer an ISA
So, if you want to transfer an ISA, here’s what you need to know.
First off, you need to check that the new provider permits ‘transfer in.’ You must also do your homework to ensure it offers the highest rate (if it’s a cash ISA) or best – and cheapest – investment service for your needs (if it’s a stocks-and-shares ISA).
Once you’ve made your choice, you need to get in touch with that provider and fill out an ‘ISA transfer form.’ There’s nothing to stop you making as many transfers as you wish to during a tax year. This won’t affect your allowance in any way. You can transfer an ISA at any point during the tax year – there are no restrictions.
The ultimate no-no is withdrawing money from an ISA and trying to move it yourself. If you do, you will lose the tax-free benefits. You must always use the ‘transfer service’ offered by your new provider. This applies to making either a cash ISA transfer or a stocks-and-shares ISA transfer.
What else do I need to know?
If you opened your ISA in the current tax year, you must move the amount in full. You can then top up this account if you wish to once it’s with your new provider. But if you are moving money you have invested in ISAs opened in previous tax years, you can transfer any amount. This does not count towards your overall £20,000 allowance. Note though, that some ISA providers will not allow a partial transfer out, insisting all funds are moved and the account closed.
You are permitted to make a transfer from a cash ISA to a stocks-and-shares ISA and vice versa. When moving money from ISAs from previous years, you can split this between a cash ISA and a stocks-and-shares ISA.
Remember to look out for any notice periods, and any penalties for moving money from your existing ISA. This could be the case with a fixed-rate cash ISA, say, if you are making a transfer before the fixed term has come to an end. Do the maths to check whether the penalty cancels out any benefit to be had from making the move. Some stocks-and-shares ISA platforms may also charge transfer fees to move money out. Be sure to check for any initial or set-up charges on the new ISA, too.
Consider robo-advisers
Be aware that a host of robo-advisers will accept ISA transfers. This includes the likes of Nutmeg, Wealthify and Moneyfarm. You could also transfer your ISA to an investment platform such as Interactive Investor. The key is to do your research to find the right option for you.
How long does it take to transfer an ISA?
If you’re moving from one cash ISA provider to another, it should take less than 15 days. If you are moving money into a stocks-and-shares ISA – or taking money out – this should take no more than 30 days.
If you are unhappy with the time your ISA transfer is taking, you should first ask your new provider what’s causing the hold-up. If you are unhappy with the response, you can take your case to the Financial Ombudsman Service.
Transfers between Stocks and Shares ISAs
As an investor, you need to be aware that transfers between Stocks and Shares Isas are sometimes ‘cash transfers.’ This involves the current underlying holdings within the Isa being sold before the cash proceeds are transferred to the new one. The cash proceeds are then reinvested within the new Stocks and Shares ISA into the chosen underlying investments.
The alternative method is an ‘in specie’ transfer. This is where your current underlying holdings are moved between ISA providers without being sold to cash. On the upside, an ‘in-specie’ transfer can help you avoid any ‘out of market’ periods and means that your investments stay invested and you do not lose out on any potential gains during the period, but it can sometimes take longer to process. That is because the underlying holdings need to be ‘re-registered’ with the new ISA provider.
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