Transferring ISA investments: a short guide

Bure Valley Group is an investment introducer platform which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice. 

ISAs are a fantastic way for investors to generate dividends, capital gains and interest in a tax-free manner. Each year, you can commit up to £20,000 into your ISA(s) – individual savings accounts – and, over time, this could amount to a sizable tax-efficient portfolio if you make the most of your yearly allowance. However, what happens if you ever want to move funds inside one ISA into another? Are the funds “locked in”, and are you limited to only move up to £20,000 per tax year?

Fortunately, an ISA transfer can allow you to move funds from one ISA to another without too much hassle. Below, we explain why investors might want to make such a transfer, the typical steps involved and how to integrate your ISAs into a wider investment strategy. We hope you find this content useful. To find out more about our EIS and other investment opportunities, visit our portfolio page here. To enquire regarding our latest projects and funding (for investors and founders, respectively), you can reach us via:

+44 160 334 0827

 [email protected]

 

Why would I transfer an ISA?

There are many reasons why an investor might want to move capital from one ISA to another. A common reason is that you’ve found a better ISA provider – i.e. one offering a better interest rate and more/cheaper investment funds. 

Another important ISA transfer reason is wanting to move funds within a particular ISA into a different assets class. For instance, perhaps an investor has realised he holds too much capital in cash ISAs and wants to move the money into equity funds instead (which would require moving it into funds within a stocks & shares ISA instead).

A final reason to consider an ISA transfer is to consolidate funds from different ISAs into a single account so that everything is easier to manage.

 

How to transfer to another ISA

The really important thing to remember is to not withdraw your money from any ISA you want to transfer from (i.e. so it is “ready” to transfer into another ISA). Remember, taking the money out means that it loses the tax-free benefits of your ISA “wrapper”. Also, you may not be able to put the money back in – for instance, if you withdraw more than £20,000 (the annual limit that you can put into your ISAs).

To make a transfer to another ISA provider, you must essentially transfer the account itself – or the funds held inside it. You can transfer as much/little as you like. The £20,000 annual limit is only for deposits made within the current tax year. It does not apply to transfers, and you can make as many of these as you like.

It is usually easiest to transfer from one cash ISA into the cash ISA of another provider. When all the paperwork is complete, the whole process should take no longer than 15 days. You can also transfer into another ISA type (e.g. from a cash ISA into an innovative finance ISA). Here, however, you should first check that your new provider accepts “transfers in”. The rules are more complex in these scenarios and so the process can take longer.

Transfer requests to a new provider usually take one of two forms: full transfer or partial transfer. The latter involves moving some of the funds in your current ISA into a new one, whilst keeping the remaining balance invested/saved in the account. The former involves moving the full ISA account value into a new one. 

Bear in mind that if you want to transfer money you’ve invested in an ISA during the present year, you must transfer all of it. However, money invested during previous tax years can be transferred in full or in part to a new ISA, depending on your wishes.

 

ISA & long-term investment strategy

As a tax-efficient investment vehicle, an ISA is a powerful way to build long-term wealth and enjoy more of your real returns. With careful planning, however, you can minimise the number of ISA transfers you may need to make. Here are some ideas:

  • Hold nothing in cash. There is very little concrete benefit to a cash ISA in today’s low interest rate environment. In fact, interest rates from non-ISA accounts are often better than those offered by ISAs. Most people do not have enough cash savings to face a charge on their interest. Those on the Higher Rate, for instance, need to earn £500 in interest before they are taxed. Instead, consider focusing your yearly ISA allowance on investments such as equities and startups – whether the potential return is higher, and you can enjoy tax-free capital gains.
  • Shop around. Don’t just open up an ISA with your high street bank. Instead, take time to survey the market for the best deal. Many providers will offer a wider range of funds which also have a lower management charge, for instance. Others will allow for cheaper active trading compared to many banks. Angel investors may also wish to focus on an ISA provider which offers greater startup investment opportunities. 

 

Invitation

Interested in finding out more about the exciting startup projects we have on offer to investors here at Bure Valley Group? Get in touch today to start a conversation with our team and discuss some of the great investment memorandums we have available here:

+44 160 334 0827

 [email protected]