An Individual Savings Account is a class of retail investment arrangements available to residents of the United Kingdom. It qualifies for a favourable tax status. Payments into the account are made from after-tax income. The account is exempt from income tax and capital gains tax on the investment returns, and no tax is payable on money withdrawn from the scheme either. Cash and a broad range of investments can be held within the arrangement, and there is no restriction on when or how much money can be withdrawn. Funds cannot be used as security for a loan.Until the Lifetime ISA was introduced in 2017 it was not a specific retirement product, but any type can be a useful tool for retirement planning alongside pensions.
Transfer rules
Transfers between providers are allowed. A transfer from a Cash ISA to another Cash ISA must usually be completed within 15 business days. Any other type of account transfer must usually be completed within 30 days. There are a range of restrictions and workarounds:
- The transfer must be carried out by the managers. If a saver withdraws the money from the existing manager, the subsequent reinvestment will be treated as a new ISA subscription and is subject to the current year’s subscription limit. HMRC allows a single cash ISA self-transfer by withdrawing and redepositing per year. All current year money must be removed from the source account.
- When transferring it is still necessary to comply with the rule that you can have only one cash ISA manager and one S&S ISA manager in use at the same time with money paid in from the current tax year. Transfer of cash ISA money paid in during the current year must be all of the money if it is to another cash ISA manager. If the transfer is from cash to another type the transfer can be partial but must be to either the first ISA of the year of that type or to the one already used for current year money. After the transfer to the other type the money counts against its limit, not the cash limit.
- Before transferring stocks from one ISA manager/platform/provider to another it is worth checking that the new provider will accept all the stocks held in your ISA. Providers have different criteria for deciding if a particular stock can or cannot qualify for ISA status within their platform and you may have little choice but to liquidate that stock or withdraw it from the ISA wrapper.
- For current year money you can transfer from a cash ISA to a S&S ISA then withdraw the money from the S&S ISA and redeposit some or all the money into another cash ISA, subject to the annual contribution limit. This allows you to circumvent “new money only” restrictions imposed by some cash ISAs that will not accept transfers in, provided you have sufficient annual allowance available.