How to Transfer Your Cash ISA
A cash ISA transfer lets you move your tax-free savings into a new account with a higher interest rate. By following the right process you can transfer your money from one cash ISA into another, or move your money into a stocks and shares ISA.
If you’ve got money lingering in a cash ISA on a low interest rate, you may want to move your money into an account with a higher rate.
However, it’s important to follow the transfer process. If you simply close one ISA and open a new ISA, the money will lose its tax-free status and will count towards the current year’s ISA allowance.
Each year you can pay a maximum of £20,000 into an ISA (the current ISA allowance) – however, depending on the account, you may be able to transfer more than this if you have a larger ISA balance that has accrued over a number of years.
Here we explain what you need to know about cash ISA transfers and how they work.
What is a cash ISA transfer?
You do not need to withdraw the money yourself and deposit it into the new account, instead, when you’ve chosen the new account the provider will make the transfer.
As the new provider transfers the money before you’ve closed your old account, it retains its tax-free status and doesn’t count towards your ISA allowance in the current year.
How cash ISA transfers work
When you’ve found a new cash ISA and you want to move your money over, the first thing to check is if the new account accepts transfers, as not all accounts allow them.
If the new account accepts transfers you are then free to open it and the provider can transfer over your cash. You will usually need to fill out a transfer form which will include details of your previous account such as the name of the bank.
The process usually takes around two weeks to complete.
The ISA transfer rules
Using a cash ISA is a great way to save without paying tax but you need to consider the rules listed below:
- Always let the new provider set up the transfer.
- You can make as many cash ISA transfers as you like, but you can only pay new contributions into one cash ISA each tax year (running from 6 April to 5 April).
- There may be a fee to transfer your money, so compare this to the overall interest rate gain to check it’s worth it.
- Some ISAs may charge a penalty if you transfer cash out of them within a fixed rate period.
- If you haven’t added money into an older cash ISA in a while, you may need to ask your provider to make the account ‘live’ again before you can transfer it into a new account.
Transferring whole vs partial ISAs
If you are transferring an old ISA from a previous tax year, you can choose to transfer all or part of the ISA.
However, if you have paid into a new ISA in the current tax year you must transfer the whole ISA, you can’t just transfer part of the ISA.
How to transfer a cash ISA into a stocks and shares ISA
You may want to move money from a cash ISA into a stocks and shares ISA. The process here is the same in that you need the new provider to set up the transfer.
As with transferring cash to another cash ISA, you’ll need to fill out a transfer form from the new provider and then it usually takes up to 30 days for the transfer to complete.
It’s worth remembering that a stocks and shares ISA is a medium to long-term stock market based investment and you may get back less than you invest. It is important that you read the terms and conditions of the account to ensure you understand the potential risk to your capital before transferring your cash ISA.
How to transfer a stocks and shares ISA to a cash ISA
Moving money from a stocks and shares ISA to a cash ISA follows the same rules and your new provider will conduct the transfer after you’ve filled in a transfer form.
It can take a little longer for the transfer to be made and it will depend on the type of investments you have in your stocks and shares ISA. Your new provider will ask you to list the investments and then let you know the timeframe for the transfer. There may also be costs with this kind of transfer, but you should be told these before you move your money.
How to get the best ISA transfer rates
If the goal when moving an ISA is to get a better return on your cash you should consider that when reviewing new cash ISAs. Remember to also look at any penalties for moving money around, the length of fixed rate periods of interest, and crucially if the account will let you transfer money in from another ISA.
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Rebecca Goodman is a freelance journalist who has spent the past 10 years working across personal finance publications. Regularly writing for The Guardian, The Sun, The Telegraph, and The Independent. Read more