So, you’ve got some money in an ISA, but have spotted another provider offering higher interest rates, lower fees, and better customer service. You want to make the switch, but there’s one problem: you don’t know how to transfer an ISA. Thankfully, we’ve put together this handy guide to help you with your ISA transfer!
Before we get into the finer details, however, it’s important to understand the basics, starting with the following question:
What is an ISA transfer?
ISAs – or Individual Savings Accounts, to give them their full name – are a tax-efficient way to save or invest up to £20,000 each tax year.
An ISA transfer is the process that lets you move money built up in previous years to a new provider, without losing the tax-free status of that money. You can transfer an ISA from one provider to another or use it to move your money between the four different types of ISA:
- Cash;
- Stocks and Shares;
- Innovative Finance;
- Lifetime
For example, let’s say you’ve saved £40,000 in a Cash ISA with one provider, and want to transfer it to a Stocks and Shares ISA with another provider (or vice versa).
An ISA transfer lets you move that £40,000 all in one go to a Stocks and Shares ISA with another provider — and still have your £20,000 allowance from the current tax year. It’s important to note that, unless you’re moving funds from the current tax year, you don’t need to transfer the full amount; you can transfer a partial amount of savings within your ISA, too.
And, if you’re wondering how to transfer an ISA properly, the good news is that it’s a relatively straightforward process (although please note that your tax treatment will depend on your individual circumstances, and it may be subject to change in the future).
How to transfer an ISA
As you can start an ISA transfer any time and from any provider, you could be forgiven for thinking that this would be a long-winded, lengthy process. Thankfully, nothing could be further from the truth, because transferring an ISA is simple!
Regardless of what provider you have or choose to move to, the process for how to transfer an ISA always follows the same five steps:
Step One – Find Your New Provider: The first thing you want to do is find a new provider or product to move to. There are a lot of options to consider here, including what type of ISA to move to.
If you’re transferring an ISA to a Stocks and Shares ISA, for example, then you have more decisions to make; do you want a DIY option where you pick your own investments, or do you want a team of experts to manage your investments for you as Wealthify does?
Step Two – ISA Transfer Form: Once you know where you’re going to transfer an ISA, let your new provider know you want to get started. There may be a form on their website’s signup journey, or they may directly be in touch with you to sort out the details.
The important thing here is the ISA transfer form, which you’ll need to complete before being able to move your money.
If you withdraw the money without using this form, then it will count against your tax-free allowance if you choose to reinvest in an ISA. If everything is filled out correctly, then your new provider will organise everything and move your money over for you — retaining its tax benefits in the process.
Step Three – Check for hidden or additional fees: When you use an ISA transfer to leave an old provider, you may notice some additional fees you have to pay. This is quite common when transferring investments, as some providers may charge you a fee for each stock you want to transfer out.
Step Four – Transferring: This is when your new provider moves the money away from your old provider. There’s nothing for you to do here, except sit back and wait for the money to hit your new account.
If this process does start to drag, however, don’t be afraid to give your providers a gentle nudge. Either one should be able to tell you exactly why the ISA transfer is taking longer than expected.
Step Five – Make sure it’s all there: For the majority of cases, this step is just a matter of checking to ensure your new provider has completed your ISA transfer. However, with Stocks and Shares ISAs, you may be entitled to some additional payments that came in after you transferred (dividends, for example, can sometimes be paid two months after a qualifying date).
Normally, these will be automatically sent to your new account, but it never hurts to check.
Why should I transfer my ISA?
If you’re thinking about transferring an ISA, then there are some basic questions you should ask yourself before going any further:
- Does the ISA I’m transferring to offer better returns than my current one?
- Does the new ISA provider accept transfers from other accounts?
- Are there any charges or penalties for transferring an ISA?
Everyone has their own reasons for an ISA transfer, but the most common ones are:
Better returns: Whether you’re changing from one Cash ISA provider to another or swapping saving for investing with a Stocks and Shares ISA; being able to get potentially better returns is a big reason for an ISA transfer.
Reduced costs: If you’ve got a Stocks and Shares ISA, it’s a good idea to check how your management and investment fees compare to other providers. And, if you can reduce your costs by changing providers, then that could be enough reason to transfer an ISA.
Easier to manage: If you’ve got existing ISAs that you don’t use anymore, transferring them all to one place could make managing and staying on top of financial performance easier.
How long does an ISA transfer take?
There are a number of different factors which can impact how long an ISA transfer takes. For example, moving from one type of ISA to another generally takes longer than moving between Cash ISAs.
Also, some providers rely on manual transfers, where others may be quicker by using an electronic process.
- Transferring between Cash ISAs: This kind of ISA transfer takes around 15 days.
- Transferring from Stocks and Shares ISA to a Cash ISA: Because of the increased complexity that’s involved with selling your investments and converting currencies, an ISA transfer of this nature could take up to 30 days.
- Transferring between Stocks and Shares ISAs: You may have the option to move the investments you hold to your new provider without selling them. This is often called an ‘in specie’ or ‘re-registration’ transfer and can take between four to six weeks. However, a cash transfer is more common, which works in the same way as moving to a Cash ISA.
- Transferring from a Cash ISA to a Stocks and Shares ISA: If you choose to make this type of ISA transfer, you’ll need to understand the security that you’re giving up by moving away from a Cash ISA. Stocks and Shares ISAs may offer more potential, but in order to achieve that, you need to take on the risk that you could lose money if the markets fall (because, as with all investing, your capital is at risk).
ISA transfer rules
When it comes to ISA transfer rules, it’s a good idea to check you fall within them, so that you can maintain the tax status of your money — and ensure a seamless transition between providers. Here are some of the key ISA transfer rules:
- When transferring an ISA you’ve opened or paid into in the current year, you’ll have to move the full amount.
- Always use the official ISA transfer form, which will be given to you by your new provider. Do not withdraw your money to move it; doing this will void the tax-efficient status of your savings.
- When transferring an ISA that’s been built up in previous years, you’ll have the option to choose how much you move (this could be the partial or full balance).
- With an Innovative Finance ISA, you can transfer the cash out, but may not be able to transfer other investments.
- When transferring a Lifetime ISA to a Cash ISA or Stocks and Shares ISA, you’ll lose your bonus. From April 2021, the penalty was increased to 25%, meaning a loss of over 6%.
- Not all ISAs allow transfers in, but all must allow transfers out. Be careful to check this when looking at providers.
- Some providers charge a penalty for exiting or transferring out before a certain date; this is particularly common with fixed-term Cash ISAs.
- Additionally, some providers charge a fee for transferring an ISA in, so make sure you check that before choosing a provider.
- Fees and charges aside, there are no limits on the number of ISA transfers you can do; you could transfer an ISA once a month every month if you wanted to.
Do ISA transfers count towards allowance?
No, ISA transfers don’t count towards your current tax year’s ISA annual allowance.
You can transfer your funds from multiple ISAs into one, but it’s best to use the provider’s ISA transfer procedure to do this (like Wealthify offers). By transferring an ISA balance using the ISA transfer form, that money retains its tax benefits.
For example, if you simply withdrew your money from one provider’s ISA then deposited it into a new provider’s ISA, you’d potentially ‘use up’ your allowance in the process. At Wealthify, we always prefer our customers to use our ISA transfer form in order to keep their allowance and retain their tax benefits.
Rest assured; if you do decide to transfer between ISAs, your current tax year’s allowance isn’t affected by what you deposited into an ISA during any previous tax year.
The one important thing to remember is to avoid withdrawing money from an ISA yourself or moving it to a personal bank account. Doing so means the money will permanently lose its ISA status — and adding it back will simply use up another portion of your ISA allowance (unless it’s a Flexible ISA).
Can I still get ISA tax relief if I temporarily withdraw some of the money?
There are a few different rules around this, and it depends on what kind of ISA you’re going for and what tax year you added the money.
Moving money in the current tax year
Across all ISAs held, you can put in up to £20,000 in a tax year and get tax relief on it (apart from a Lifetime ISA, where the maximum amount you can put in each tax year is £4,000). So, if you put £10,000 into your ISA, you’ve used up half of your allowance.
With most ISAs, if you take that money out later in the same tax year, then it doesn’t make a difference to your allowance (and you’ll have still used up half of your allowance). If you put that £10,000 back in again, then you’ll have used up your whole £20,000 allowance for the tax year.
What counts is how much you put IN; what doesn’t count is how much you take OUT.
However, with a Flexible ISA, the money you take out of your account does make a difference to your ISA allowance.
So, if you put £10,000 into your Flexible ISA in May, you’d have used half of your annual ISA allowance. If you took £10,000 out again in June, your allowance goes back up to £20,000.
Moving money across different tax years
If you’ve been paying into a Stocks and Shares ISA for several tax years and want to take money out, it will firstly be taken from the money you have paid in the current tax year. After that money is used up, the money will come from the past tax year’s investments.
After the tax year passes, you start again with a new ISA allowance.
With most ISAs, once you take out the money, you can’t get that ISA allowance back; this also applies for previous tax years.
However, with a Flexible ISA, you can take out money from previous years without it affecting your old ISA allowances (provided you put it back in during the same tax year which you took it out).
So, if you put £10,000 in your Stocks and Shares ISA in 2017, you can only keep the tax relief for that exact amount of money.
Can I have more than one ISA?
You can open and pay into multiple ISAs in the same tax year (excluding Lifetime ISAs) if you’re a UK tax resident aged over 18, and haven’t used your full allowance yet. Also, you can transfer existing ISAs from previous tax years without affecting your current tax year’s allowance.
How to choose the right Stocks and Shares ISA provider
If you’ve decided that investing is right for you and you’re happy to take the risk, then finding the right Stocks and Shares ISA (also known as an Investment ISA) is probably your next course of action.
It’s important to be meticulous in your search, as the difference in costs between providers can be huge; seeing as the cost eats into your profit, you want to try to keep them relatively low. Similarly, the services offered are very different.
If you aren’t ready to choose your own investments, then there are a number of providers who will build an Investment Plan for you. When looking at these, you should think about things like:
- The level of flexibility they offer.
- Can they tailor your investments to match your appetite for risk?
- How they invest.
- Whether they diversify their investments globally.
- How much their investment costs and management fees are.
For example, at Wealthify, our experts build the Investment Plans for our customers, but some Stocks and Shares ISA providers require you to research, choose, buy, and sell your own investments.
To have the best experience, you should think about choosing a provider that lets you choose a strategy that matches your needs, offers a good level of service, and has competitive fees.
Interested in starting your investment journey with Wealthify? Then check out our Stocks and Shares ISA page, which contains more information on how to transfer an ISA to us.
If you’re looking to transfer a Junior ISA, we’ve got everything you need to know about junior ISA transfers, too.
With investing, your capital is at risk; the value of your investments can go down as well as up, and you could get back less than invested.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
