ISA transfers – what you need to know…

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If you want to grow your savings free of income tax and capital gains tax, then an ISA is a great way to do it. How you invest the money can have a significant impact on your long-term returns, so here we explore how ISA transfers work and what to look for.

There are two common types of ISA, Cash ISAs and Stocks and Shares ISAs, and the current ISA allowance is £20,000 (2017/18).

It is well worth shopping around for a deal on your ISA, whether you are looking to open a new ISA or currently have savings held in an ISA, as your current provider may not be the best choice to meet your long-term savings or investment goals.

The investment market is continually evolving, and your current provider may no longer be offering competitive interest rates (Cash ISA), or may not offer the tools to improve your investment returns (Stocks and Shares ISA). So, it may make sense to transfer your ISA elsewhere.

How do I transfer an ISA?

Firstly, check with your provider for any restrictions they may have on transferring ISAs. You must also check if there are any transfer penalties – particularly if you have a fixed-term ISA, to make sure that the transfer will pay off.

Shop around for a good deal and do your research to make sure your prospective new provider accepts ISA transfers and that the transfer will be financially beneficial. Once you decide on the provider, contact them to open an account and complete their ISA transfer form.

Your new provider will then contact your old provider to complete the transfer and this should take around 15 days to transfer a Cash ISA to another Cash ISA. It can take a little longer – up to 30 days – if you are transferring in to or out of a Stocks and Shares ISA, and then you will need to decide where to invest your money. It’s as simple as that!

Bear in mind, that whilst transferring your ISA is a simple process, there are some rules to follow:

  • There is no ISA transfer limit and you can transfer at any time
  • If your ISA has been opened in the current tax year, you must transfer the whole amount. You can top this up if you want to, with the new provider, within the limit
  • You can transfer part of an ISA if it was opened in a previous year – this can be any amount and does not affect your current years tax allowance
  • You can transfer your savings to a different type ofISA or to the same type of ISA.
  • Savings from previous years can be split between the two, for example a Cash ISA opened in 16/17 can be split and transferred into a Cash ISA and a Stocks and Shares ISA
  • Providers must allow you to transfer out of a Cash ISA, but do not have to allow you to transfer in
  • Some Stocks and Shares ISA investment platforms apply transfer fees per ISA fund – make sure you check if this applies. You can partly mitigate this by consolidating your investment funds prior to a transfer

Important points to note:

Do not withdraw your money before initiating a transfer – you won’t be able to reinvest that part of your tax-free allowance again.

If your transfer takes longer than the timelines indicated above then contact your ISA provider. If you’re unhappy with their response, you can take the matter up with the Financial Ombudsman Service.

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