Transferring My ISA: What Do I Need to Know?

POSTED ON Wednesday, 04 November, 2020

Your ISA allowance for this tax year is £20,000; and beyond this, there are further limits on how much money you can put into certain ISA accounts. But – what about transferring ISA accounts? We’ve broken down all the key information you’ll need if you want to make a switch. 

Why would I transfer my ISA?

There are a lot of reasons why you might want to transfer your ISA accounts – whether it’s to a different type of ISA or a different provider.

These might include:

  1. You’ve found a better rate with another provider
  2. You want to change to a different type of ISA
  3. You want to make your Cash ISA into an Investment ISA
  4. You want to try out a new form of investment

How Do I Transfer My Cash ISA to Another?

When looking to transfer your Cash ISA – you need to know what you’re looking for and you need to know the key stipulations. Luckily, we’ve got what you need to know:

  1. You need to ask your providers to switch your account for you – both your current and your desired provider. It’s important to make sure the banks are the ones who do the transferring, as if you withdraw and move the money yourself if looses the tax-free status.
  2. Your current bank is required by law to ensure that they accept your request for transfer – but your desired provider is not, so make sure that you check that they will accept a transfer before you start the process.
  3. You can transfer any ISA you hold, whether it is from this year or previous years.
  4. You can transfer funds from previous ISAs into different accounts, splitting the benefit you can gain.
  5. You could be subject to penalties from your current provider for switching – make sure you’ve read the small print to be prepared to know what percentage (if any) of your money they might take as a leaving penalty.
  6. You have to transfer your ISA from the current tax year in one lump sum. Previous years’ ISAs can be split when transferred.
  7. You can pool all of your money from previous ISAs into one bank account, you are able to do this. But the money will only be protected up to £85,000 as this is the FSCS limit.

How do I Transfer my Investment ISA?

If you are looking to transfer your Investment ISA – whether this is to another Investment ISA account or to a Cash ISA – then you’ll need to know the following:

  1. You are able to move money from your Investment ISA to your cash ISA – no matter if these are held with the same provider or a different one.
  2. Like with Cash ISAs, you need to make sure your providers do the legwork to make the switch for you. Otherwise, you run the risk of loosing the tax free status of your money if you attempt to withdraw and re-invest yourself.
  3. Be aware that transferring to Investment ISAs takes longer than Cash ISAs. Cash ISAs often take about 15 days to transfer, but Investment ISAs can take up to 30 days in order to process.
  4. You can choose whether you want to transfer your Investment ISA as stock or as cash. Generally this will boil down to whether or not you are happy with your investments. If you are, you should transfer as stock, and if not then cash might be a better option. Transferring your ISA Investments to cash will involve selling the stock your money is invested in.
  5. Like with Cash ISAs, there might be exit penalties by certain providers when it comes to transferring to a different supplier. Getting in contact with your new provider might be worth your while here, as some suppliers may agree to cover the cost of these penalties for you because you are transferring to their service.
  6. Follow up with your previous provider once it’s been a couple months. Because dividends on investments are usually paid a few months after the investment has been made, you might be due some payments from your last couple months with that supplier. They should forward these to you automatically, but they might not always so it is worth following up. 

Read about ISA Transfers

Read about Cash ISAs

Read about Investment ISAs