6 minute read

What are the ISA transfer rules?

You are allowed to transfer ISAs from one provider to another and, in most cases, it is relatively straightforward. Here we look at how to transfer an ISA, why you might want to transfer an ISA (or not) and what you need to watch out for so you don’t lose the tax benefits of an ISA
Published on 15 April 2021

Don’t close your old ISA!

Let’s start with this one because it’s a costly mistake to make. If you want to transfer your ISA from one provider to another, don’t close your ISA account or withdraw any of the money from your ISA. Why? Because inside your ISA account, your cash or investments are tax-free. Financial advisers often refer to ISAs (and pensions) as tax wrappers – your ISA wraps around your cash or investments like a magic blanket, protecting them from the clutches of tax officials on the other side! 

This is a helpful image when thinking about transferring ISAs. Your cash and investments need to pass from one magic blanket to another without being exposed to the outside world. If the blanket slips, the tax officials move in and your lovely tax benefits will be lost.

Contact the ISA provider you want to transfer to and they will organise your ISA transfer for you.

Does transferring an ISA use up my ISA allowance?

No. When you transfer an ISA, it doesn’t use up your ISA allowance

  • If you’ve used £10,000 of this year’s ISA allowance before transferring, you’ll still have £10,000 left to put into your new ISA
  • If you’re transferring a £30,000 ISA that you haven’t contributed to this tax year, you’ll still have a £20,000 ISA allowance to use once your new ISA is up and running

Do I have to transfer my whole ISA?

That depends on whether you are transferring an ISA that is just made up of contributions from this tax year or one built up over more than one tax year.

  • If you’re moving an ISA that you opened and contributed to this tax year then, yes, you have to transfer the whole thing
  • If you’re moving an ISA that you’ve contributed into for more than one year then you can choose to transfer part of your ISA or the whole ISA

Can I transfer more than one ISA?

Yes you can. If you have a number of ISAs it’s often easier to manage them if you combine them into one. You hear this referred to as consolidating your ISAs. You can do this by moving your ISAs into one of your existing ISA accounts (as long as your provider accepts ISA transfers) or you can transfer into a new ISA.

Can I transfer any kind of ISA?

Yes you can but there are sometimes penalties, for example if you’ve got a fixed-term Cash ISA, so check your paperwork before transferring. 

You can transfer your ISA to the same type of ISA with another provider

There are a number of different types of ISAs: Cash ISA, Stocks & Shares ISA, Junior ISA, Lifetime ISA and Innovative Finance ISA. You can transfer each of these ISAs into the same type of ISA with another provider.

  • Transferring cash from one ISA to another should be straightforward 

  • If you’re transferring a Stocks & Shares ISA it is possible to transfer your investments within the ISA without selling them (known as an in specie transfer) as long as your new provider offers the same investments. Alternatively you can sell the investments, making sure you keep the cash within your ISA. This cash will then be moved to your new ISA ready for you to pick new investments

     
  • If you’ve got funds in an Innovative Finance ISA that are on loan, it’s important to follow your ISA provider’s process

You can transfer between different types of ISAs

People often switch from one type of ISA to another. For example, they may choose to transfer a Cash ISA into a Stocks and Shares ISA or vice versa. It’s simple to do this but remember that Stocks & Shares are higher risk than cash as the value can go up and down and you can lose money.

It’s also straightforward to transfer into a Lifetime ISA but more complicated to transfer out because of the specific rules around Lifetime ISAs. It’s also more complex with an Innovative Finance ISA. 

You can transfer between a cash Junior ISA and a Stocks & Shares Junior ISA but you can’t transfer a Junior ISA into another type of ISA. It will automatically become a regular ISA on the child’s 18th birthday.

Why would I consider transferring my ISA?

People transfer ISAs for many reasons. Often they can see a better opportunity elsewhere, for example an ISA offering a higher-cash interest rate, a wider choice of investments or lower fees. They might want to move all their ISAs to the same provider or keep different accounts for example an ISA and a pension under one roof. 

What do I need to think about when transferring an ISA?

  • While you are entitled to transfer your ISA from your current provider, not all providers accept transfers into their ISAs so do your homework

  • We’ve said this already but we’ll say it again - don’t close your ISA or withdraw any funds you want to transfer. Your new ISA provider will need to organise your ISA transfer. If you don’t follow the process, you’ll lose the tax benefits within your ISA

  • Will you lose out by transferring your ISA? For example will you face a penalty or lose interest when you transfer? Check with your provider before kicking off a transfer. Do bear in mind that if your existing ISA provider charges an exit fee, your new provider may cover the cost. At Bestinvest we pay up to £500 towards exit fees*

  • Does the new provider offer everything you need? For example, they may offer lower fees but if that means a smaller choice of investments or no telephone support, does that matter to you?

How long do ISA transfers take?

That depends on the type of ISA and who you are transferring from and to. Digital transfers into a Bestinvest Stocks & Shares ISA, for example, can take a couple of weeks.

Can I transfer an ISA to someone else?

No. You can’t transfer an ISA from one person to another. You’d have to withdraw money from your ISA so they could pay it into theirs and, in doing this, the tax benefits would be lost.

Can I transfer an ISA if I’ve withdrawn money using flexible ISA rules?

If you transfer an ISA when you’ve withdrawn money using flexible ISA rules, you will lose your flexible ISA allowance.

How Bestinvest can help

Bestinvest offers Stocks & Shares ISAs. We don’t offer Cash ISAs, Lifetime ISAs or Innovative Finance ISAs.

*Terms & Conditions apply

The value of an investment may go down as well as up, and you may get back less than you originally invested

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