How to find the best cash Isa Switching your cash Isa
You could significantly improve the return you earn on old Isa savings by transferring them from low-paying accounts into Best Rate cash Isas.
However, before trying to move your money, you must understand the rules around Isa transfers and ensure you stick to them - or you may find your Isa savings lose their tax-free benefits.
I opened a cash Isa in 2010, but now my interest rate has dropped. Can I move my money into a new Isa?
Yes. You can move all or part of previous years' Isa savings to an account with any other Isa provider that accepts transfers, and this will not affect your Isa allowance for the current tax year.
While you are only allowed to hold one 'active' Isa per tax year - that is, an account into which new Isa money is being paid - you can hold multiple 'inactive' Isas from previous tax years.
Some people like to have all their money in one place, and so choose to transfer their old Isas into a single new account each year. However, there is no rule that says you must do so.
If you choose to roll up all your Isa savings into one account, be careful that this doesn't push the total amount you hold in savings with a single financial institution above £85,000 - the maximum protected under the Financial Services Compensation Scheme. For more information on this limit and how to ensure your savings are safe, read the Which? Are my savings safe? guide.
What if I've already paid into an Isa this tax year?
Even if you have already paid into an Isa this tax year, you can still transfer previous years' savings into different accounts.
If you wish to (and provided you have not paid into a fixed-rate cash Isa), you can even transfer all of your savings - including the money you have put into this year's cash Isa - to a new provider.
However, if you're thinking of putting your Isa savings from this year into an account that also houses money from previous years, be sure to check whether you'd be better off by keeping your cash separate. Isas that allow transfers in often pay lower interest rates than those that don't, so it can make sense to hold two separate Isas each year: one for older savings which you can no longer pay into, and one for the current year's Isa allowance.
Can I transfer my cash Isa savings to a new account myself?
No. If you want to transfer money from an old Isa into a new account, you must not simply withdraw your cash and then seek to re-invest it. If you do, there's a risk that your savings will lose their tax-free status.
If you want to move money from one Isa to another, your old and new Isa providers should arrange the transfer of your funds between them, protecting your tax-free benefits.
Oops! I've moved cash Isa providers without following the rules. Will I still get tax relief on my savings?
Because the 'self-transfer' of Isas isn't allowed, by withdrawing and moving your money yourself you may have forfeited its tax-free status.
However, if you closed your first Isa, withdrew your savings from the current tax year and then transferred them to a second cash Isa, it is likely that this second Isa would be declared valid by HM Revenue & Customs (HMRC). If you were to make the same mistake again by opening a third Isa, though, this would be declared invalid for tax purposes.
If you've accidentally opened too many cash Isas within a single tax year, it's a good idea to contact HMRC's Isa helpline and seek advice on what to do next.
However, it is far better to avoid falling foul of the Isa rules in the first place by allowing your Isa providers to handle the transfer of your savings.
If I withdraw money from my cash Isa, can I put it back in the account later on?
If you take money out of your account, it's possible for you to replace that cash later in the tax year - but only if you have not already invested the maximum sum allowed in your Isa.
Your annual cash Isa limit of £5,760 applies to the money that is paid into your account, rather than your Isa balance. For example: if you paid £1,000 into your cash Isa on 30 April 2013 and then withdrew it in June, you would only be able to pay in £4,760 to your account between then and April 5 2014.
To invest more in your cash Isa, you'd have to wait until the beginning of the new tax year on April 6 2014.
How does the end of the present tax year affect an Isa?
Each 6 April you get a fresh annual allowance, regardless of the present balance in your account. If you haven't used your full Isa allowance from the previous tax year, however, this will not be carried over.
Can I move money from cash Isas into stocks and shares Isas?Yes - but it isn't possible to convert a stocks and shares Isa into a cash Isa. Therefore, you should think carefully before transferring your cash Isa savings into stocks and shares because you won't be able to reverse your decision later.
- Take a look at our guide to stocks and shares Isas
- Find out about tax on savings and investments
- For a personalised solution, call our experts on our Money Helpline