Everything you need to know about ISA transfers

Everything you need to know about ISA transfers

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From time to time it’s good to go over our past decisions and see how they are working out. When it comes to personal finance, re-evaluating some past decisions could even be profitable. Looking at ISAs (Individual Savings Accounts) is a great place to start.

At the moment you may be holding a Cash ISA, Innovative Finance ISA, Lifetime ISA or Stocks and Shares ISA. These all offer different types of tax relief for your money and are suitable for different types of people. If your finances are in good shape, you may now be considering your other ISA options and exploring what else is available on the market.

Alternatively, you may want to switch ISA providers. Perhaps you suffered a bad customer experience, or would prefer to have a Stocks and Shares ISA which uses ethical investments.

These are all solid reasons to make a transfer. However, before you jump ship and switch your ISA, there are some rules you must follow. If you ignore the correct procedures, you could even end up losing your annual ISA allowances by accident. To help you get started, we’ve put together this useful guide with everything you need to know about transferring ISAs. 

 

Can I transfer a Cash ISA into Stocks and Shares ISA?
Transferring money from one type of ISA to another is perfectly allowed, and simple to do. There are several different types of ISAs available: Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs and Innovative Finance ISAs. You can transfer any type of ISA to a different type of ISA. For example, you could move all the money from a Cash ISA into a Stocks and Shares ISA and keep all the tax benefits.

If you would like to move money during this tax year (2019 / 2020) you will need to transfer all of it in one go. If you would like to transfer money which you put into your ISA account in a previous tax year, then you are free to move just some of it if you prefer. How much you feel you would like to transfer is up to you.

 

Are there any restrictions around transferring ISAs?
There may be some terms and conditions set in place by the provider, which you should watch out for. For example, this could include exit fees or minimum term clauses. This information should be available in the contract as well as the online FAQs and Terms & Conditions pages. Checking the terms and conditions before you sign up could be a good idea.

There are also some limits which are put in place by the government. For example, if you transfer from a Lifetime ISA to a different ISA before the age of 60, you will have to pay a withdrawal fee of 25%.

 

Can I transfer my ISA to another provider?
Yes you can. It’s important that you follow the procedure, rather than trying to move the money yourself, or you could accidentally lose all your ISA tax benefits from over the years. To transfer one ISA to another provider is quite simple. For a Stocks and Shares ISA, you will normally need to download a form and post it. You can most likely find the transfer form on the website of the new provider.

You can find out how to safely transfer your money to Wealthify with this quick video guide.

 

Can I withdraw money from my Stocks and Shares ISA?
Normally yes. It’s not like a pension where your money is locked in. With Stocks and Shares ISAs you can generally sell your investments and get the cash, although there may be some exceptions depending on the provider. It’s best to double check before beginning your investment journey just in case.  

Most investment plans are designed to grow your money over the medium to long-term (more than five years). Treating investments like current accounts could harm your long-term strategy. Taking your money out early also means that you could be missing out on potential market growth. You can find out more about why investments work better over time here.

Because your provider will need to sell all of your investments to give you back the money, getting your money back will not be instant. However, for most mainstream providers it shouldn’t take much longer than two weeks. With a Wealthify Stocks and Shares ISA, you can withdraw your money at any time, and you will receive it in your bank account within ten working days. It could be sooner, but we can’t promise.

This does not apply to Junior ISAs, where the money is locked in until the child turns 18. However Junior ISAs can be transferred, you can read more about these rules below.

 

Can I still get ISA tax relief if I temporarily withdraw some of the money?
Good question! There are a few different rules around this, and it depends on what kind of ISA you are going for and what tax year you added the money.

 

Moving money in the current tax year:
With all ISAs you can put in up to £20,000 in a tax year and get tax relief on it. So if you put £10,000 into your ISA, then you have used up half of your allowance. Simple.

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 will have still used up half of your allowance. If you put that £10,000 back in again then you will 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. This is how it works for most ISAs.

With a Flexible ISA, money which you take out of your account does make a difference to your ISA allowance. So if you put £10,000 into your Stocks and Shares ISA in May, you would have used half of your annual ISA allowance. If you took £10,000 out again in June, you would have used none of your allowance. If you put £10,000 back in again in July, you would have used half of your ISA allowance again. Flexible ISAs are well named, because they move with you and reflect the financial changes in your investment plan.

 

Moving money across different tax years:
If you have 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, then the money will come from the past tax year investments.

After the tax year passes, you start again with a new ISA allowance. With most ISAs, once you take out the money, then you cannot get that ISA allowance back. Or in other words, you cannot have your ISA cake and eat it.

This also applies for previous tax years. Imagine that you had been putting £10,000 a year into your Stocks and Shares ISA for 5 years. This means that you have put in £50,000 and have used up half of your ISA allowance every year. If you wanted to take out £30,000 then you would be taking out money from the past three years. You would lose your entire tax allowances from the three previous tax years.  

However, with a flexible ISA you can take out money from previous years without it affecting your old ISA allowances, provided that you put it back in during the same tax year which you took it out. For example, if you decided on the 6th April 2019 to take out ISA money from an old tax year, you would have to put it all back again by the 5th April 2020 to have the same tax relief.

You will only get that year’s tax relief on the exact amount of money that you originally put in. 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. You cannot retrospectively add more money and try to get more of 2017’s ISA allowance than you originally used up. This is to prevent people from abusing the system and claiming decades worth of tax relief if they come into a large sum of money, such as winning the lottery.

 

Do Stocks and Shares ISA providers have different minimum investment amounts?
Yes, the minimum investments can vary a lot from provider to provider. A minimum investment is the smallest amount of money possible that you can start investing with. This is a key point to bear in mind when you are looking to transfer from one provider to another.

Some Stocks and Shares providers tend to require a minimum investment of around £500. The reason for this is because it is important to have a mix of different investment types. Investment managers will need to purchase a variety of investments with your money to give you the best chance of growth, and so more money is needed. This could be an obstacle if you want to transfer your ISA, but don’t meet the minimum investment amount.

This will not be a problem if you are looking to transfer to Wealthify. We offer investment plans with an exceptional mix of investment assets, and there’s no minimum investment. Believe it or not, our customers have more than 13,000 investments in their plan – which is more than many other providers - even if they only invest a little. Our mission is to make investing accessible to everyone, which means that what you can afford should never hold you back from becoming a serious investor.

 

Minimum monthly deposits
Some investment platforms require a minimum monthly deposit. For others, it is optional. With Wealthify, it is totally your choice and you can change your mind at any time. This is also worth looking into if you are considering transferring to a Stocks and Shares ISA.

Whether or not you are obliged to add monthly top-ups to your investment plan, it could be a good idea and habit to get into. Not everyone can afford a hefty lump sum, but even if you can, the top-ups could help smooth out your performance over time and help your nest egg grow.

 

What are the ISA transfer fees?
This depends entirely on the ISA provider. Usually the new provider will not charge any joining fees, however the old provider may have exit fees, or even exit clauses. There is no standard answer for this, and you should be able to find out more on provider’s website.

However, another more important point to consider could be the fees charged by the providers themselves. In the ISA industry, the fees charged by different banks and robo-advisors can be quite extreme. Comparing the level of service (such as DIY investing platforms against fully managed investment plans) and the fees charged could be a good starting point. Wealthify offers a fully managed service with low fees - read more about the rates here.

 

Can I transfer a Junior ISA?
Yes. The transfer rules for a Junior ISAs are similar to adults in the way that you can split your allowance. A child could have a Junior Cash ISA and a Junior Stocks and Shares ISA. For example, if you wanted to add 30% of money into a Junior Cash ISA, and 70% into a Junior Stocks and Shares ISA, this would be fine. There are many different options and ways which different parents use to make the most of their children’s ISA options.

In terms of transferring ISAs and staying on top of the rules, the main differences between ISAs and Junior ISAs are the allowance and investment time. The annual ISA allowance is less for children than adults, for this tax year (2019 / 2020) is £4,368 (subject to change). Money cannot be taken out of a Junior ISA until the child reaches the age of 18. Even though money is put in by the parents or guardian, only the child can access it when they turn 18.

Another difference is that the parent or guardian will need to set up or transfer ISAs on behalf of their children. You can find out more about setting up a Junior ISA here.

 

Taking charge of your financial future
All in all, transferring an ISA type or provider can be a sensible and could even be a profitable step to take as you re-evaluate your financial future. There are two key things to remember: Most importantly, ensure that you follow the correct procedure and do not try to transfer your ISA yourself or you could lose your ISA benefits. Secondly, make sure to closely check your current provider’s terms and conditions for exit fees.

If you are interested in transferring to a Wealthify Stocks and Shares ISA or Junior ISA, the process is hassle-free.

You can find out more by calling our friendly customer service team, or watch this quick video guide.

To get started, visit our information page on transferring to a Wealthify ISA.

 

The tax treatment depends on your individual circumstances and may be subject to change in the future.

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

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