You may already be versed with the different types of ISAs, including Cash ISAs (helpful for short-term savings) and Stocks and Shares ISAs (better for longer-term investing).
But in this article, we’ll deep dive into how transferring between ISAs works, transfer rules you’ll need to consider — and why Wealthify might be a good provider to add to your list.
- How do ISA transfers work?
- What are the transfer rules?
- Does transferring an ISA count as opening a new one?
- Can you transfer part of an ISA?
- Can I transfer my ISA to someone else?
- When should I transfer my ISA?
- Transferring to a Wealthify Stocks and Shares ISA
How do ISA transfers work?
If you’re reading this, you probably already have at least one ISA, and you’re thinking about moving the money to a different type or to another provider.
From better benefits, cheaper fees, or wanting to try an alternative method of wealth-building (like switching to investing rather than saving) there’s a range of reasons why you might be considering a move.
Out of the four different types available to UK tax residents (excluding Junior ISAs), transferring is relatively common between two types of ISA, while the other two have more restrictions to consider.
Commonly transferred ISAs include
Always check your provider will accept the transfer, using their official transfer procedure to ensure you get to keep your tax-free benefits. Generally, however, you’ll see these transfers commonly available:
- A Cash ISA to Stocks and Shares ISA.
- A Cash ISA to another provider’s Cash ISA.
- A Stocks and Shares ISA selling off their investments and transferring to Cash ISA.
- A Stocks and Shares ISA transferring to another Stocks and Shares ISA (this also requires the investments to be sold off and transferred over as cash for the new provider to invest it).
ISA transfers that are typically restricted
- Lifetime ISAs can be transferred to another provider, but you cannot have two open at the same time. The existing account would effectively close after the transfer is complete.
- Lifetimes ISAs can’t be withdrawn from for anything other than purchasing your first home or being used as a personal pension pot for retirement. If you take money out for anything else, you’d face a penalty, lose the generous government bonus it offers, and any interest accrued.
- If you’re looking to move money in an Innovative Finance ISA (IFISAs) to another provider, you may need to wait until your funds are available as cash again. Your money might be invested in a Peer-to-Peer loan scheme, crowdfunding venture, or something similar. (Anything already held in cash would be simpler to transfer over.)
- Transfers from an Innovative Finance ISA to a Cash ISA or Stocks and Shares ISA would be down to the new provider, so check they can accept it before initiating the transfer. (Wealthify does accept transfers Innovative Finance ISAs when the assets are in cash, for example, but always check with your current provider about any early exit fees).
How long do ISA transfers take?
Transferring cash held in an ISA is a quicker process, typically taking 15 business days.
Whereas the process of transferring a Stocks and Shares ISA would involve selling off your investments and being ‘out of the market’ for a while, until the transfer is complete. The guideline is about 30 calendar days.
If you use the new provider’s transfer process but it’s taking a little longer than expected, get in contact with them to check everything is on track.
What are the ISA transfer rules?
For the current 2024/25, the ISA transfer rules are as follows:
- Using the provider’s official transfer process (usually as a form they provide), means you won’t lose your tax-free ISA allowance entitlement for the current tax year:
- At the moment, this is set at £20,000 for 2024/25
- But remember it could be subject to change in future tax years;
- And this allowance amount must be split across all the different ISA types you’re paying into this tax year.
- Lifetime ISAs are capped at £4,000 per tax year (but you can use your remaining allowance across the other ISA types).
- For the above reason, it’s important to use the new provider’s ISA transfer form/process, rather than manually withdraw and deposit the funds yourself.
- Similarly, don’t close your ISA if you want to transfer; again, use the official transfer form.
- Money you have held that’s above the £20,000 because you deposited this in previous tax years, can easily be transferred over without affecting this year’s allowance, too. This allowance resets each year on April 6th.
- Check whether there’s an exit fee from your current provider, or charges to transfer into the new provider’s account (Wealthify doesn’t charge to transfer in or out).
- Transferring between Stocks and Shares ISAs and Cash ISAs (and vice versa) is usually straightforward. There are more considerations when transferring Lifetime ISAs and Innovative Finance ISAs (which we’ve outlined above).
- You can transfer more than one type of eligible ISA into the same pot.
- If you manage a Junior ISA for your child, you can transfer between the two different types available (Junior Cash ISA or Junior Stocks and Shares ISA). However, the child can only have ONE of each of these open at any one time — noting that the Junior ISA’s tax-free allowance of £9,000 per tax year is spread across both (not £9,000 for each type). The new provider’s transfer process will handle closing the previous provider’s account smoothly for your child.
This list isn’t completely exhaustive, but there are a few more key considerations we’ll detail below.
Does transferring an ISA count as opening a new one?
No, that’s the beauty of an ISA transfer. The new provider’s official transfer process will move your funds over without it counting as ‘opening a new one’.
Can I transfer part of an ISA?
Yes, transferring only part of your ISA is possible if it’s the money you deposited during previous tax years.
For the current tax year, your new provider may ask you to transfer the whole amount of this year’s deposits, as it’ll be down to the discretion of their own policy.
Can I transfer my ISA to someone else?
No, ISAs are designed to benefit an individual person only.
The key point is it’s the tax-free allowance – and the benefit you receive by not needing to pay capital gains tax or income tax on any profit you make – which can’t be passed on to a child, family member, or close friend.
At least, not without withdrawing it manually to hand it over to them (a greetings card with a fancy bow being optional). If this is part of your plan, it could be worth brushing up on your £3,000 per tax year gift allowance.
However, there is a key pointer about what happens if you were to pass away while married/in a civil partnership:
Can ISAs be transferred on death?
Your tax-free allowance benefit can only transfer to a spouse or civil partner that you are still living with at the time of your death (not those considered as separated). This is called an Additional Permitted Subscription (APS). It’s a good benefit to pass on, as they’d effectively see their ISA allowance jump from £20,000 to that, plus whatever your ISA’s balance is for that particular tax year [1].
However, if you were to leave your ISA to a child or someone other than your legal partner, they would face inheritance tax on any investments you had past the date of your ISA being closed/your estate being marked as ‘completed’ [2].
When should I transfer my ISA?
There’s no such thing as a ‘best time’ to transfer an ISA! It’s completely up to you, your individual circumstances, and whenever you find a better provider.
You can transfer at any time throughout the tax year, but it may be worth being mindful of the tax year ending on April 5th. This is mainly because the transfer process can take a few weeks, so you may want to plan ahead and deposit as much into an ISA as you can afford, before initiating it.
The ISA allowance will reset on April 6th, giving you a new tax-free amount to save or invest for that tax year.
If your current provider is charging higher fees than you’re comfortable with, offering lacklustre interest rates, or your investments are consistently underperforming — then that could be an indicator that it’s the ‘right time’ to shop around.
Transferring to a Wealthify Stocks and Shares ISA
If you’re thinking about transferring to one of Wealthify’s ISAs, you have a couple of options available. And it may be helpful to work out what your overall goal is for this money first, then work backwards to decide which one is best for you.
For longer-term goals like wanting to purchase a second home, saving for retirement (although we do have a Personal Pension to help with this, too), or investing to try and beat inflation — then our Stocks and Shares ISA could be the best choice.
Especially as investing is considered a long-term strategy as, naturally, there will be highs and lows in the stock market. For that reason, it’s helpful to treat investment ISAs as a 5-10 year minimum (ideally, the longer the better).
Step 1. Fill out our transfer form
This gives us permission to handle the transfer for you, and lets you tell us how much to transfer. It’s also when you can tell us what kind of investment style you have — plus select whether our Original or Ethical Investment Plans sound right for you.
Step 2. Take a quick quiz
This is just to check this product is suitable for you and your needs. It takes your attitude towards investing and circumstances into consideration.
Step 3. Leave it to our experts
Based on what you’ve told us, our Investment Team will gear up to not only help build your ISA, but manage it with your interests at heart.
You can put your feet up from this point on. Hop onto the app or dashboard to monitor your portfolio’s progress at any time!
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
References:
[1]: https://www.gov.uk/individual-savings-accounts/inheriting-an-isa-from-your-spouse-civil-partner
[2]: https://www.gov.uk/individual-savings-accounts/if-you-die
