How to Make a Cash ISA Transfer
A cash ISA transfer lets you move your tax-free savings into a new account. You can transfer your money from one cash ISA into another, or into a stocks and shares ISA, but there are some rules to know before going ahead.
If you have money sitting in a cash ISA that’s earning a low rate of interest, you may like the idea of moving your savings to an account that offers a healthier rate. Or you may be looking for better customer service, easier management of your account or just better features.
Before you set any wheels in motion, it’s important to follow the transfer process if you don’t want to lose the tax-free status provided by an ISA.
Here’s what you need to know about cash ISA transfers, and the process to follow.
What is a cash ISA transfer?
You don’t need to withdraw the money yourself and deposit it into the new account. In fact, you’ll want to avoid the DIY approach, as closing the ISA account and opening a new one can mean you lose the tax benefits associated with these funds. Instead, when you’ve chosen the new account, you should ask your new provider to make the transfer.
As the provider will transfer the money before you’ve closed your old account, it will keep its tax-free status and doesn’t count towards that year’s ISA allowance.
Although you can move your cash ISA at any time, bear in mind that if you have a fixed-term ISA, you may have to pay a fee or lose some of the interest you receive if you transfer it early.
How to transfer a cash ISA
When you’ve found a new cash ISA and want to move your money over, check if the new account accepts transfers, as not all accounts do. Also check the terms and conditions of your current agreement, so you know whether you’ll have to pay any fees or charges.
If you get the green light, you are then free to open your new ISA account 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, and how much you want to transfer.
The process of switching cash ISAs from one provider to another should take no more than 15 working days to complete. Transferring to a stocks and shares ISA may take longer.
Cash ISA transfer rules
A cash ISA is a great way to save without paying tax, but there are some rules to follow:
- Always ask the new provider to 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.
- You may be required to transfer the full value of the ISA depending on when you contributed to the account.
- You can transfer the cash element of an innovative finance ISA but you may not be able to transfer other investments within it.
» MORE: How fixed rate ISAs work
How much can you transfer into the new cash ISA?
If you are transferring an old ISA from a previous tax year, you can choose to transfer all or part of the funds. But if you have paid into a new ISA in the current tax year you must transfer the whole ISA; you can’t just transfer some of it. Transferring an ISA doesn’t use up your ISA allowance for the current tax year.
Each tax year you can pay up to £20,000 into an ISA as new contributions, but it may be possible to transfer more than this if you have a larger ISA balance built up over the years. You may want to do this to consolidate multiple cash ISAs you’ve opened over time, to make managing your savings simpler.
If combining ISAs pushes your ISA savings to above £85,000 with one institution – which is the maximum amount protected by the Financial Services Compensation Scheme – you may prefer to keep your savings across more than one provider.
How to transfer a cash ISA into a stocks and shares ISA
To move money from a cash ISA into a stocks and shares ISA, you will 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.
A wide range of investments can be held within a stocks and shares ISA. Due to this and like with any other form of investment there’s a risk that you could get back less than you invest. Make sure you fully understand the potential risk to your capital and the charges involved before transferring a cash ISA into a stocks and shares 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. Your new provider will carry out 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 may ask you to list the investments and then let you know the time frame for the transfer. There may also be costs with this kind of transfer, but you should be told these before you move your money.
» MORE: Which cash ISA is right for me?
How to get the best cash ISA transfer rates
If the goal when moving an ISA is to get a better return on your savings, you’ll want to look for the most competitive interest rate. Rates vary across cash ISA providers and may also depend on the type of access you’re looking for and the amount you’re looking to deposit. So it’s well worth taking the time to do some research.
The latest cash ISA rates, from many different providers can usually be found online. But also look at any penalties for moving money around, withdrawal restrictions, the length of fixed-rate periods of interest – and, crucially, if the account will let you transfer money in from another ISA.
WARNING: We can’t tell you if any form of investing is right for you. Depending on your choice of investment your capital can be at risk and you may get back less than originally paid in.
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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
Holly champions clear, jargon-free writing. She’s been creating finance content for leading organisations for over 10 years. Read more