Cash ISA rates are on the rise and could go even higher after today's base rate rise, but if you are planning on moving your ISA savings to make the most of the extra interest available on the top-paying cash 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 with a high street bank for any length of time, 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 1.30%, but you need to give 95 days’ notice if you want to make a withdrawal.
You can get 1.15% with Coventry Building Society with 30 days’ notice or 1.07% with the Easy Access ISA from Post Office Money.
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 you had benefited from in the past. You could have sheltered hundreds of thousands of pounds and closing the ISAs would remove the associated tax breaks. It would also limit the amount you could put into an ISA for this tax year to just £20,000. If you have more than that in existing ISAs, you would not be able to put it back into an ISA. So, whatever you do, don’t close your existing ISA accounts.
Q. How can I move my money though if I don’t close the accounts I have?
A. You can transfer them directly from one ISA account to another. What you have to do is choose which account you would like your money to go into and get in touch with the bank or building society offering the account. As long as they will accept transfers in from other accounts, 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, do they have to stay in investment ISAs?
A. Actually, no. The rules have changed and if you decide you would like to move your stocks and shares ISAs into cash ISAs, then you can now. 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 directly from one ISA to another. Again, get in touch with the organisation that offers the ISA you want to transfer to and they will open the account for you and arrange the transfer with your existing providers.
Q. But if I wanted to move it to more than one cash Isa provider, how do I do that?
A. If you are moving from stocks and shares ISAs to cash ISAs, you may find it easiest to move the entire amount to a single cash ISA and then make partial transfers to the other cash ISAs you desire after that. However, it is important to note that any funds deposited in the current tax year must be transferred in full to one provider – it cannot be split.
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. Our sister company The Private Office can help with this. 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.
For more information on how to start using ISAs to your advantage, download our Navigating the ISA Maze guide today. If you need any help or guidance with an ISA transfer, please do not hesitate to get in touch and call us on 0800 011 9705.