Transferring ISAs

There are a number of reasons why transferring your Individual Savings Account (ISA) could stand you and your investments in good stead but you need to be aware of the disadvantages too.

Transferring your ISAs doesn’t affect its tax-efficient status. But you should make sure that you don’t have to pay penalties or give up valuable benefits. Tax rules can change in future. Their effects on you will depend on your individual circumstances.

What you’ll learn:

  • Why you might want to transfer your ISA from one provider to another.
  • How to make an ISA transfer.
  • How long an ISA transfer can take.

The choice of who you save and invest with lies entirely in your hands. So if you want to switch from an existing ISA provider to a new one, you're perfectly within your rights to do so.

However, it’s vital to make sure you’re aware of both the risks and benefits of making a transfer before you act. If you’re unsure whether transferring is right for you, seek professional independent financial advice.

Benefits of transferring

Transferring your ISAs could allow you to widen your range of investment choices, as the range on offer can differ between providers. If, for example, you move to our Smart Investor service, you’ll be able to choose from thousands of funds, stocks and shares, Exchange Traded Funds (ETFs) and investment trusts.

Another reason to switch is that you may find you're better off because another provider is offering lower fees and dealing commission charges.

You may also want to move because you prefer to keep all your investments conveniently in one place, where they're easier to monitor and manage.

Risks of transferring

Before moving your ISA to a new provider check that you won't incur any penalties or lose any benefits by doing so.

If you have to sell investments to make a transfer, you may incur a loss if you have fixed-term investments, and you’ll be ‘out of the market’ until you re-invest within your new ISA. Should the market or investment type rise in value during that time, you’ll miss out on the gains. That said, if the market falls, you shouldn’t lose out.

You also may incur dealing charges to sell an investment and then buy it back.

Remember too that having sold an investment you'll miss out on any dividends or other corporate actions and will lose access to any shareholder benefits for which you need to be a holder over that period (or indeed lose them completely should they no longer be available to new investors). If you are moving between two investment ISA providers it is often possible to transfer investments without them being sold. If you opt for this, there’ll be a period during the transfer when you won’t be able to sell existing investment holdings.

How long this period lasts will depend on the assets you hold, but it may also be affected by how quickly the broker you’re transferring from can carry out the transfer and whether it’ll accept an order to sell while making the transfer. There may also be delays in receiving dividends, other income and information, as well as delays to exercising shareholder concessions or receiving notification of voting rights or corporate actions, such as rights issues. These could affect your ability to respond where deadlines are shorter.

How to transfer your ISA

You can transfer your Individual Savings Account (ISA) from one provider to another at any time. You can also transfer from one type of ISA to a different type of ISA, for example, you can move money held in a stocks and shares ISA into a cash ISA, or from a cash ISA to a stocks and shares ISA. Similarly, money held in an innovative finance ISA can be transferred into a stocks and shares ISA or into a cash ISA. Remember though, not all ISA providers will accept transfers, so check with the provider you’re hoping to move to. Bear in mind too, that the ISA provider you’re looking to move from might charge you for the transfer, so ensure you check what costs, if any, there could be.

If you transfer cash from an existing ISA into a lifetime ISA1 it will count towards your £4,000 lifetime ISA allowance for the year and qualify for the government bonus, but will not count towards your overall ISA allowance, which is £20,000 in the 2022-23 tax year. It is not advisable to transfer from a lifetime ISA.

Transferring your ISAs won’t affect their tax-free status, provided you follow the correct process. You might think that to make a transfer from one ISA to another, you’ll need to close down your existing account, make a withdrawal, then open up a new account and pay in. But closing down your current ISA means you’ll immediately lose all the tax benefits, so never withdraw your savings to pay into a new ISA. Instead, if you want to make a transfer, you should alert the provider you’ll be moving from and the one you’re moving to, who’ll manage the whole transfer process for you. Remember that tax rules can change in future and their effect on you will depend on your individual circumstances.

If you want to move your ISA to Smart Investor, you’ll first need to open an Investment ISA with us.

Lifting the lid on limits

Savers can make an ISA transfer safe in the knowledge that their tax-free benefits remain locked in, provided the correct transfer process is followed. There’s one limitation – if you’re transferring an ISA that you’ve contributed to in the current tax-year, you must transfer all of the current year contributions you’ve made. For ISA balances from previous years, you can choose to transfer all or part of your savings.

Waiting times for ISA transfers

Just how long you have to wait for your ISA transfer depends on the type of account being transferred. Moving from one cash ISA provider to another should take no more than 15 working days.

Transferring an investment (stocks and shares) ISA may take a while longer. This is because the assets may need to be encashed (liquidated) if you’re transferring to a cash ISA, or re-registered if you’re transferring to a stocks and shares ISA with a new provider.

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