An Isa transfer allows people to move their money from one provider to another without losing the tax-free benefits.
Isas make it possible to save or invest up to £20,000 each tax year into either savings or stocks and shares while shielding interest, dividends or capital gains from tax.
Moving old Isas to a new provider won’t count towards this allowance, as the £20,000 limit only applies to money paid in from outside an Isa.
The tax protector: You can think of an Isa as a shield that protects your savings or investments up to £20,000 from being subject to taxation
There are a number of reasons someone might want to transfer their Isa to a new provider.
It could be down to the interest rate, cost, customer service levels, or simply moving from cash to stocks and shares or vice versa.
When it comes to transferring from one cash Isa provider to another, it will most likely be in order to secure a better interest rate.
Cash Isa rates vary greatly. For example, many of the big banks pay less than 1 per cent on their easy-access cash Isa deals, while some of the best deals offered by challenger banks and building societies are paying over 3 per cent.
We recently revealed the best cash Isa rates for transfers.
Moving a stocks and shares Isa to a new provider can make sense for all sorts of reasons, from attempting to cut platform or management charges to trying to boost performance.
What are the rules when transferring an Isa?
As things stand, you can only open one of each Isa type in a given tax year.
For example, it’s not possible to open two investment Isas in a tax year, but it is possible to open one investing Isa and one cash Isa.
Transferring an Isa won’t count as opening a new one. Therefore, you can transfer an Isa to a new provider and still have the option of opening another Isa later that tax year.
Get a better deal: Savers who hold cash Isas with some of the biggest high street banks are more in danger of being ripped off with a below-market interest rate
You can transfer some or all of your Isa allowances from previous years. However, if you’d like to transfer your current year’s allowance you must transfer the entire balance.
Under current rules, Isa providers must allow transfers out, but there is no obligation to accept transfers in. Therefore, not all Isa providers do so – so it’s always worth checking this before switching.
How transferring an Isa works
Transferring an Isa is a fairly simple process. First, open an Isa account with a new provider. Second, let the new provider know that you want to transfer an existing Isa into it.
The new provider will send you an Isa transfer form, either online or by post, and once completed and returned, your new provider can then complete the transfer for you electronically or by post.
The process should take no more than 15 days for cash Isas and 30 days for stocks and shares Isas.
When Isas are transferred, they go with a transfer history form which details how much of the money is from the current year’s subscription and how much is from previous years.
Be careful when withdrawing money from an Isa
Previously, if you withdrew money from an Isa, you could not put that money back in without it counting towards your current annual Isa subscription.
Now the rules allow you to take out money and replace it within the same tax year — whether it’s from an old Isa or your current tax year’s Isa without using up your allowance. However, this perk is available only on a ‘flexible Isa’.
And not all Isa accounts — whether cash or stocks and shares — fall under this description. So check with your Isa provider before you act.
How do I choose the right Isa to switch to?
This is very easy for those opting to transfer to a cash Isa. Head to This is Money’s best buy tables for cash Isa rates for all the best deals.
Our tables are independent and providers are not forced to pay to appear, which is typically the case at big comparison sites.
All banks and building societies are registered with the Financial Services Authority and signed up to the Financial Services Compensation Scheme, either directly (protecting up to £85,000) or via its passport scheme (where the compensation limit depends on the bank’s home country. In Europe it is €100,000).
When transferring to a new cash Isa provider, always keep in mind that not all Isa providers accept transfers in.
Finding a better deal for your stocks and shares Isa will usually mean finding a provider that either charges you less or offers greater investing choice.
DIY investing platforms are a simple and cost effective way to buy, sell and hold investments and typically allow customers to do so within an Isa wrapper.
When weighing up the right one, it’s important to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs.
We have written an extensive guide on the best and cheapest DIY investing platforms, which might help.
Do you have to transfer everything in one go?
If your existing Isa was opened in the current tax year, you will need to transfer the entirety of it to the new provider and close the old account.
However, if you’re transferring Isa funds made during a previous tax year, you can transfer as much as you wish without it impacting your current annual Isa allowance.
Other Isa transfer rules worth knowing
Transferring cash to cash Isas
If you’re transferring from one cash Isa provider to another during a tax year, it won’t affect your annual allowance as long as you follow the correct transfer process.
Bear in mind that some cash Isa providers will charge a penalty for leaving. This is particularly the case with fixed term deals which are yet to finish.
It’s always worth checking what these fees are so you can weigh up whether the transfer is cost effective.
Transferring stocks and shares to stocks and shares Isas
Transferring a stocks and shares Isa to a new provider will typically take longer than a cash Isa transfer. How long will depend on the method you use.
There are two ways to transfer a stocks and shares Isa. You can either opt for what is known as an ‘in specie’ transfer, or you can sell the investments and transfer as cash.
The ‘in specie’ transfer will involve each share or unit being transferred directly to the new provider.
If you’re happy with all your current investments this will make sense as you’ll remain invested throughout the process.
However, it’s important to check with your current provider whether there will be any charges for doing this.
Transferring an Isa won’t count as opening a new one, so you can transfer an Isa to a new provider and still have the option of opening another Isa later that tax year
It’s also worth checking with the new provider that they can accept all investments you intend to move across. Some offer less choice than others.
The ‘in specie’ transfer will typically take between four and six weeks. However in some cases it may take longer.
The other option is to sell the investments that make up your Isa portfolio and transfer as cash to the new provider.
The Isa protection will remain in place throughout the process and the new provider will reinvest your money in line with your wishes.
With this option, there is a danger of missing out of any stock market gains in the interim, but if you’re looking for a fresh start then it could make sense.
It should typically take less time than the ‘in-specie’ transfer, although there are no guarantees.
What about stocks and shares to cash?
In the past, it wasn’t possible to transfer money from a stocks and shares Isa into a cash Isa.
Savers could only transfer money the other way — from cash to shares. But the rules have changed and it’s straightforward to go either way.
As with transferring from one cash Isa to another, you still need to ask the new provider to carry out the transfer for you.
It should take no longer than 30 calendar days. But don’t be tempted to take the money out and transfer it yourself.
