ISA transfers can be a great way to get your money working harder. The only catch: if you do them incorrectly, you could end up losing the tax-free status of your money. In this post, we explain how ISA transfers work and why you might want to transfer yours.
What is an ISA transfer?
An ISA transfer is the process of moving your ISA money from one provider to another without losing its tax-free status.
Money already in an ISA needs to be transferred in a specific way, rather than withdrawn as cash — if not, the money will lose its tax-free status. ISA providers will manage this process for you to ensure it is done correctly.
How do ISA transfers work?
You can transfer all three types of ISA: cash, stocks & shares and innovative finance. You can choose to move your money from one type of ISA to another or keep it in the same type of ISA and just switch providers. In each case, you can transfer money into an existing account or open a new one. Regardless of what kind of ISA transfer you make, your money will maintain its tax-free status for the tax year in which it was originally invested.
Does this affect my annual £20k limit?
No – you can transfer money that was added into an ISA in previous tax years without affecting this year’s ISA.
However, if the money you want to transfer has been added in the current tax year, this will count towards your annual limit.
Why should I transfer my ISA?
There are a few reasons why transferring your ISA could be a good idea:
- To get a better rate: Your money might be stuck in a cash ISA or an old ISA that isn’t offering great returns. Transferring your ISA to a provider that offers a better rate of return can be a great way to get your money working harder. However, it’s important to note: if you switch from a cash ISA to a stocks & shares or innovative finance ISA, you may be at risk of losing some or all of the money you transfer, as it will be invested rather than held in cash.
- To diversify your ISA portfolio: If you’re looking to spread your money across different asset classes to reduce your overall risk, transferring to a different kind of ISA or provider can be a great way to do this. Options include: consumer loans, property and ethical investments.
- To keep all your ISAs in one place: Some people prefer to keep all their money together with one provider (or just a few providers) to make it easier to manage and to reduce paperwork. In addition to this, some providers will give you a higher interest rate if you have a larger balance.
Can I transfer any ISA?
Some types of ISA can be more difficult to transfer than others. Your existing ISA might be fixed term, have a specific notice period, or be highly illiquid. This means that you may not be able to transfer your money whenever you like, or you may be penalised for transferring your money earlier than agreed.
Also, on some occasions, you may have to pay a transfer out fee or a transaction charge, if your provider has to sell your assets – like with a stocks & shares ISA.
How long does a transfer take?
It depends on the type of ISA and the ISA providers that you are looking to transfer between, but, in most cases, ISA transfers usually take up to 4 weeks to complete.
How do I transfer my ISA to Propio?
When adding money to your Propio account, you can choose “Transfer existing ISA”. If you would like to do this, we will send you an email with an ISA transfer form and instructions on how to complete this. Once you’ve sent the form back to us, we will manage the transfer process for you. When the money has been transferred, we’ll let you know and then you can choose how it is invested.