Cash ISA rules

[ro250]

I opened a 1 year fixed rate cash ISA in October 2022. This was a lump sum and no further deposits allowed.

I opened a second cash ISA in May 2023 which I am paying into regularly.

After the 1 year period of the first ISA, this will revert to their standard flexible ISA which has terrible interest rate. What am I permitted to do with this ISA? Can I open a new ISA elsewhere and transfer the balance and that won’t count as paying into 2 ISAs in a single financial year? I think that’s the case but not 100% sure.

[AdamV12V]

You can only pay in a total of £20k into ALL your ISA's in a single tax year (6th April to 5th April)

Flexible ISA permit you to pay in, and withdraw multiple times and its only the NET payment in that counts towards your total. So with a flexible ISA if you pay in £10k, withdraw £5k - then you can still pay in another £15k that tax year.

Non Flexible ISAs dont have this flexibility and withdrawls do not act as a refund towards your annual total. So with a non flexible ISA if you pay in £10k, withdraw £5k - then you can only pay in another £10k that tax year.

It is the flexible / non flexible type of each individual ISA you hold that determines how it accounts for the sums paid in / out. So if you hold both types you will need to allow for this.

ISA transfers, providing they are a direct ISA to ISA transfer do not affect your annual limits either. However if you take it back to your normal bank a/c first, then it counts as a withdrawl not a transfer.

[The Leaper]

Invariably, when an ISA reaches the end of its fixed term and matures, the provider offers you the ability to reinvest that ISA in a new ISA with them at their current rates. If you do this, the amount dos NOT count towards your ISA limit of £20,000 for that tax year: it's consider to be the original ISA, so nothing new. Wife has done this many times.

R.

[ro250]

The Leaper said:

Invariably, when an ISA reaches the end of its fixed term and matures, the provider offers you the ability to reinvest that ISA in a new ISA with them at their current rates. If you do this, the amount dos NOT count towards your ISA limit of £20,000 for that tax year: it's consider to be the original ISA, so nothing new. Wife has done this many times.

R.

Thank you both.

To the second comment, that's what they say they'll do but it will be to one which has a current rate of about 1% so I won't want to do that.

It sounds like a can do an ISA transfer to a new provider which won't count towards my allowance or break the rules around contributing to 2 ISAs in the same year.

[The Leaper]

ro250 said:

The Leaper said:

Invariably, when an ISA reaches the end of its fixed term and matures, the provider offers you the ability to reinvest that ISA in a new ISA with them at their current rates. If you do this, the amount dos NOT count towards your ISA limit of £20,000 for that tax year: it's consider to be the original ISA, so nothing new. Wife has done this many times.

R.

Thank you both.

To the second comment, that's what they say they'll do but it will be to one which has a current rate of about 1% so I won't want to do that.

It sounds like a can do an ISA transfer to a new provider which won't count towards my allowance or break the rules around contributing to 2 ISAs in the same year.

I am amazed that a provider is offering a rate as low as 1% to switch from a maturing ISA with them, bearing in mind current interest rates. What's the company?

R.

[ro250]

The Leaper said:

ro250 said:

The Leaper said:

Invariably, when an ISA reaches the end of its fixed term and matures, the provider offers you the ability to reinvest that ISA in a new ISA with them at their current rates. If you do this, the amount dos NOT count towards your ISA limit of £20,000 for that tax year: it's consider to be the original ISA, so nothing new. Wife has done this many times.

R.

Thank you both.

To the second comment, that's what they say they'll do but it will be to one which has a current rate of about 1% so I won't want to do that.

It sounds like a can do an ISA transfer to a new provider which won't count towards my allowance or break the rules around contributing to 2 ISAs in the same year.

I am amazed that a provider is offering a rate as low as 1% to switch from a maturing ISA with them, bearing in mind current interest rates. What's the company?

R.

It's Halifax. In the blurb when opening it said it will mature to the Instance Access ISA which looks to be about 1% right now. Maybe when it does mature in a couple of months they'll offer something better.

[Ecosseven]

Quick question on this......

I know that the maximum you can contribute to ISA's in a year is £20k. However if you have a cash or S&S ISA that has gained in value over the year can this still be transferred to an alternative provider without impaction the current years allowance? For example:-

1. I take out a 1 year fixed rate cash ISA at 4.5% and invest £20,000. After 1 year the ISA balance is £20,900.
2. The tax year after I take out the ISA, I decide to open a new cash ISA and invest another £20,000 and transfer the existing ISA (now worth £20,900) to another provider.

The total invested in each tax year is £20,000 but the transfer value of the first ISA is £20,900.

Is this allowed within the rules?

Thanks in advance.

[The Leaper]

ro250 said:

The Leaper said:

ro250 said:

The Leaper said:

Invariably, when an ISA reaches the end of its fixed term and matures, the provider offers you the ability to reinvest that ISA in a new ISA with them at their current rates. If you do this, the amount dos NOT count towards your ISA limit of £20,000 for that tax year: it's consider to be the original ISA, so nothing new. Wife has done this many times.

R.

Thank you both.

To the second comment, that's what they say they'll do but it will be to one which has a current rate of about 1% so I won't want to do that.

It sounds like a can do an ISA transfer to a new provider which won't count towards my allowance or break the rules around contributing to 2 ISAs in the same year.

I am amazed that a provider is offering a rate as low as 1% to switch from a maturing ISA with them, bearing in mind current interest rates. What's the company?

R.

It's Halifax. In the blurb when opening it said it will mature to the Instance Access ISA which looks to be about 1% right now. Maybe when it does mature in a couple of months they'll offer something better.

Halifax equivalent product is currently at 3.4%. Not a particularly good rate. Halifax are offering a much better 5.3% for their fixed rate ISA over 1,2 or 3 years, but there are penalties withdrawals. When you current ISA matures Halifax will offer you various products to switch to based on their current rates and terms, so the choice will be yours. If you decide against Halifax and want to move the proceeds elsewhere, beware how you do this as, for example, a straight withdrawal and investment elsewhere by you will mean you lose the tax free basis of the cashed in ISA.

R.

[Car bon]

Ecosseven said:

The total invested in each tax year is £20,000 but the transfer value of the first ISA is £20,900.

Is this allowed within the rules?

Yes - that's fine.

Whatever is in an ISA can be transferred to another ISA - but it must move directly between the 2 and not withdrawn & re-invested.
New money is limited but not the value / growth - that doesn't matter.

[Ecosseven]

Car bon said:

Ecosseven said:

The total invested in each tax year is £20,000 but the transfer value of the first ISA is £20,900.

Is this allowed within the rules?

Yes - that's fine.

Whatever is in an ISA can be transferred to another ISA - but it must move directly between the 2 and not withdrawn & re-invested.
New money is limited but not the value / growth - that doesn't matter.

That's great, thanks.

[ro250]

The Leaper said:

Halifax equivalent product is currently at 3.4%. Not a particularly good rate. Halifax are offering a much better 5.3% for their fixed rate ISA over 1,2 or 3 years, but there are penalties withdrawals. When you current ISA matures Halifax will offer you various products to switch to based on their current rates and terms, so the choice will be yours. If you decide against Halifax and want to move the proceeds elsewhere, beware how you do this as, for example, a straight withdrawal and investment elsewhere by you will mean you lose the tax free basis of the cashed in ISA.

R.

Thanks. Will see what they offer in a couple of months.