The launch of both the Help to Buy and Lifetime ISAs has helped propel the method of saving into the public eye.
Whilst ISAs have been around since they replaced Personal Equity Plans and Tax-Exempt Special Savings Accounts in 1999 they weren’t always a popular savings option.
Exactly 20 years late just under nine million people have opened ISA accounts.
Whilst some ISA rates leave little to be desired, there are others which could return dividends if you are willing to lock your money away for a little while. Transferring your funds could allow you to make the most of your £20,000 tax-free allowance with a better rate of interest.
ISA key features
ISA is an abbreviation of Individual Saving Account. ISAs are not unlike regular savings accounts despite the fact you do not pay any tax on the interest you earn, and rates are often higher.
Many savers favour ISAs as there is a wide range of products available. Typically, there are three types of ISAs; Cash, Stocks and Shares and Innovative Finance.
However, there are a variety of other options available between providers.
Whilst the pros and cons between different ISA products vary, generally speaking, the benefits of ISAs are:
- Tax-efficient saving method
- You don’t have to mention ISAs on your tax return
- No Capital Gains Tax or Income Tax to be paid
Get more from your money
Transferring your ISA could generate more tax-free interest for you. If you have an ISA with a low-interest rate you are eligible to transfer that ISA balance to another account as you wish.
Typically, it is generally believed that most Cash ISAs tend to have lower interest rates than other ISA products. Therefore, it could be worth seeing if you could acquire a better rate of interest with another ISA.
Locking cash away
If you don’t have any plans for your cash for the immediate or foreseeable you might want to consider siphoning it into a Stocks and Shares ISA. Stocks and Shares ISAs can deliver better interest rates over time compared to other ISAs.
However, an increased interest rate comes at a cost. It is beneficial to remember that your cash could be at a higher level of risk when money is capitalised.
If a Stocks and Shares ISA appeals to you, make sure to keep an eye on the Wellesley website as a brand new product will be released soon.
Transferring your ISA
If you ever wish to transfer your ISA, it is a relatively simple process. You will need to complete an ISA transfer form, which you can obtain from your new provider, and the rest will be handled between new and old parties.
ISA transfer snares
- You can only have one active cash ISA per tax year
- Make sure your new provider allows for transfers between Cash and Stocks and Shares ISAs
- Some providers only accept ‘new money’ transfers
- Some providers don’t allow for transfers between Cash ISAs and Stocks and Shares ISAs
ISA transfers and tax limitations
You can transfer between ISA providers and products as much as you which during a tax year, the only limitation is your £20,000 limit.
You can virtually transfer between any type of ISA and, for money deposited outside of your current tax year, you can transfer part, or all, of your capital. If you want to transfer money that you deposited in the current tax year you must transfer it all.
Timing and fees
Depending on how many accounts are being transferred around, most ISA transfers take between 15 and 30 days.
Some ISA providers will charge you a fee to leave them, but it is unlikely you will ever have to pay a joining fee. However, being aware of any exit or joining fees before signing up to an ISA product or opting to transfer could save you any hassle.
Remember, with any ISA your capital is at risk and interest payments are not guaranteed. If you are unsure which ISA is most suitable for your circumstances, we would highly recommend that you contact a financial adviser prior to investing.
This is a paid promotion from Wellesley. The views expressed in this article do not necessarily reflect those of loveMONEY.