I have an ISA which I have not paid into this financial year. Can I transfer it into 2 cash ISAs?
28 April 2023
Question by Anthony
I have a stocks and shares ISA which I have not paid into during the current financial year. Can I transfer it into 2 cash ISAs? £80k into each
Answered by Holly Mackay
The rules are that you can have one ‘active’ type of each ISA every year – and new money paid into all types (Cash and Stocks & Shares) must not exceed £20,000. So, for example, you could pay £15,000 into a Cash ISA, and £5,000 into a Stocks & Shares ISA.
Your question is not about new money but a transfer. So. You can only have one ‘active’ cash ISA every year. If you want to transfer your ISA in, you can transfer it into one Cash ISA this tax year. You can’t open multiple ISAs in a tax year and benefit from the tax-free savings allowance in every one of these Cash ISAs.
A transfer from one ISA manager to another ISA manager during a single tax year will not affect your annual ISA allowance for that tax year, as long as you follow the correct transfer process. This means you can transfer away and still add up to a total £20,000 of new money into an ISA this tax year.
I would choose the new provider you want for the Cash ISA (you can only choose one Cash ISA this tax year). Phone them up or go online. And importantly get them to do the transfer for you. Don’t withdraw the money yourself, for heaven’s sakes. Once it’s out of the ISA, it’s out, and then you’re back to only having up to £20,000 a year.
Finally I imagine you want to split the money because of the FSCS.
The rules under the Financial Services Compensation Scheme (FSCS) are that the first £85,000 you put into a bank’s account (or £170,000 if your money is held in a joint account) is protected in the event that the bank or building society goes bust.
Remember that the £85,000 compensation limit applies per institution and not per account. That means if you have, for example, £50,000 in a Cash ISA and £50,000 in a fixed rate bond, both held with the same bank, you’d stand to lose £15,000 in the event that the bank went bust, because your deposit protection limit is a total of £85,000.
The rules only allow one Cash ISA a year so you can’t have two. Finally, if you transfer an ISA that you have paid into during the current tax year to a new provider, you must transfer the whole balance. For ISAs from previous years, you can choose how much to transfer.
It can get a bit complicated. My suggestion would be to contact your new preferred Cash ISA provider and get them to walk you through what’s involved. Your choice will then be whether to accept the FSCS limit and move it all over anyway, or move just £85,000 this tax year (you say you haven’t paid anything in to the Stocks & Shares ISA yet so you should be able to move just a part of it) and leave the rest where it is, and then transfer the remaining £75k-ish come 6th April 2024.
This will also be impacted by if you have other savings with this new bank. Remember if you do, that the total compensation covers all accounts you have, not just the Cash ISA. So take this into account.