If you want to transfer a cash ISA to a different cash ISA provider to get a better rate of interest, there are certain steps you should take to make sure that you keep the interest tax free. Find out how to transfer a cash ISA and how much you can transfer.
How to transfer a cash ISA
If you want to transfer your cash ISA to get a better rate of interest, your starting point is to find a cash ISA that finds a better rate of interest and that will accept transfers in. Not all cash ISA providers will take transfers in – namely money that you’ve already saved in a cash ISA. If you are using a price comparison site, it will normally tell you whether or not the best buys will take transfers in. If not, make sure you check with the bank or building society.
1. Check that there are no penalties for transferring your cash ISA. If you have a notice cash ISA, you may have to give notice (typically between 30 and 180 days) before you close the account. If it’s a fixed rate cash ISA, you may have to pay a penalty or lose interest or, in some cases, you may not be able to close it at all before the fixed rate term ends.
2. Open a new cash ISA with the bank or building society you want to switch to. You should tell them that you want to do a cash ISA transfer. That will mean they know that money is coming from an existing cash ISA account.
3. Fill in an ISA transfer form You can normally find cash ISA transfer forms on the bank or building society’s website. If not, ask in your local branch or phone for one.
4. Your new ISA provider should do the work for you. It should contact your existing cash ISA provider and arrange to transfer the money directly from your existing cash ISA to your new account.
SAVVY TIP: Do not close your existing cash ISA account first and transfer the money to your own bank account and then pay it into your new cash ISA. If you do this you will lose the tax-free benefits of having an ISA.
How much can I transfer?
You can transfer whatever you like from cash ISA money you’ve saved in previous tax years (or money you’ve invested in stocks and shares ISAs). That means you don’t have to transfer all the money you have saved or invested. But you can only transfer the entire cash or stocks and shares ISA allowance from the current tax year. For example:
If you’ve saved money in cash ISAs between 2014 and April 5th 2018 but then not added any more money to your ISA You could transfer all of the amount you’ve saved or some of it – as you choose.
If you’ve saved money in cash ISAs from 2014 to today you could transfer some or all of the money you’d saved between 2014 and the beginning of this tax year. Any money you’ve saved since April 6th 2018 would have to be transferred in total, or you’d have to leave it all where it was. You couldn’t transfer a bit of it and leave the rest.
How long should the ISA transfer take?
The cash ISA transfer should take no longer than 15 working days. This is industry guidance rather than a regulation, but your ISA provider should abide by it.
SAVVY TIP: If your bank or building society doesn’t transfer your cash ISA promptly, you can complain about this and you may be able to get compensation for lost interest.
When will I start earning interest?
Your new ISA provider should backdate interest to the last day that you earned it with the old ISA provider. This is designed to ensure that you don’t lose any interest. Even if the ISA transfer has not gone through on time, your new ISA provider should start paying interest on day 16 (the day after your cash ISA transfer was supposed to be complete.
SAVVY TIP: A few cash ISA providers will pay interest on ISA transfers from when they get your application. Ask your new ISA provider what its approach is, before you switch.
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