Cash ISA rates are on the rise and could go even higher as we approach the end of the tax year, so if you are planning on moving your ISA savings to make the most of the extra interest available on the top- paying ISA accounts, there are a few things you need to be aware of.
The Q&As below cover some of the main questions we are being asked by our clients.
Q. What is happening to cash ISA rates at the moment?
A. They are heading up. If you have been languishing in a cash ISA for any length of time – especially with a high street bank, you need to have a look at what else you can get right now. For example, the top paying variable rate cash ISA available is with Charter Savings Bank at 1.31% - but you need to give 95 days’ notice if you want to make a withdrawal.
If you think you might need easy access, you can get 1.30% with the Nationwide Single Access ISA, but, as the name suggests, you can only make one easy access withdrawal per year – any more and the rate will plummet. The best unrestricted easy access cash ISA is with Virgin Money, paying 1.21% tax free/AER.
Q. Great! So, all I need to do is close my existing ISAs and move my money to a new one, right?
A. Hang on, not so fast. If you close any ISAs you already have, you will lose all of the allowance and benefit that you have built up over the years. You could have sheltered hundreds of thousands of pounds and closing the ISAs would remove the associated tax breaks. So, whatever you do, don’t close your existing ISA accounts, unless you are going to spend the money.
Q. How can I move my money though, if I don’t close the accounts I have?
A. You must transfer them from one ISA account to another. What you have to do is choose which account you would like your money to go into, then get in touch with that new bank or building society. As long as they will accept transfers in from other accounts, complete the application process and then they will contact your existing provider or providers and arrange for the money to be transferred.
Q. So if I get the money transferred, I will keep all of the tax breaks associated with the ISA account?
A. Yes, exactly. Otherwise you could have significant amounts of money that is potentially exposed to tax.
Q. What about my stocks and shares ISAs, can I move them into cash ISAs?
A. Actually, yes. The rules have changed and if you decide you would like to move your stocks and shares ISAs into cash ISAs, then you now can. But again, do not close the ISAs you already have. Even though you would be moving from one form of ISA to another, to ensure the money still benefits from the tax breaks associated with ISAs generally, you must undertake a transfer from one ISA to another. Again, get in touch with the organisation that runs the ISA you want to transfer to and they will open the account for you and arrange the transfer with your existing providers.
Q. I have more than £85,000 with my current provider. If I want to move it to more than one cash ISA provider, so that I am within the Financial Services Compensation Scheme protection, how do I do that?
A. Most providers will allow you to make partial transfers, so you can choose how much you want to move to each provider during the application process. However, it is important to note than any funds deposited in the current tax year must be transferred to one provider – it cannot be split until you move into the next tax year.
Q. Can you give me advice on whether to move my stocks and shares ISA to a cash ISA?
A. We offer expert advice on cash accounts, so we recommend you speak to a specialist before deciding whether moving your stocks and shares ISAs to cash ISAs is right for you.
If you’d like advice on this, we can steer you in the right direction because over the years we have developed trusted relationships with other industry experts, including financial advisers.
So, if you are not sure if it’s the right decision for you, give us a call and we can put you in touch with an expert.
For more information about ISAs please down load our guide Navigating the ISA Maze or call us on 0800 011 9705 we are always happy to help.