Can I transfer a cash ISA to a stocks and shares ISA?

If you’ve been using your annual ISA allowance to build up a cash ISA you may have reached the point where you’d like to invest that money for the future. A stocks and shares ISA can give you potentially higher returns over the long term and you can transfer your cash ISA to one while keeping all the tax benefits.  

You’ll need to follow the right process though. It’s also important to understand the risks involved before you make the move. We’ll tell you what you need to know here. 

It is important to know that with a stocks and shares ISA your money is invested and can fall as well as rise in value. You could get back less than invested.

ISA transfers let you move the money in your ISA between different providers or different ISA types. You can do this without losing the tax benefits, which are no income tax or Capital Gains Tax on your gains.

Your new ISA provider needs to make the transfer. It’s important that you don’t make the transfer yourself or you’ll lose your tax benefits. You can normally get things going by contacting them or filling out an online form. 

It's possible to transfer part or all your previous ISAs. If you transfer a Lifetime ISA to another ISA type, you’ll lose the unique benefits for retirement or buying a home. You'll also have a withdrawal charge of 25%, so the amount transferred could be less than you've paid in.

Some providers may charge transfer fees, especially for stocks and shares ISAs, and may also have limits on how much you can transfer. So, you should make sure you check the details before you begin your transfer. 

Tax benefits are based on personal circumstances and are subject to change. 

Eligibility for ISA transfers

To transfer a cash ISA to a stocks and shares ISA in the UK, you must be a UK resident aged 18 or over, so children with a Junior ISA can’t transfer until they’re legally adults. The actual transfer needs to be handled by your ISA provider and they’ll check if you’re eligible. 

Here’s a step-by-step breakdown of how to transfer your ISA:

Choosing a new ISA provider

Decide what you want from a stocks and shares ISA. This includes which investments, like shares, bonds, investment funds and exchange-traded funds (ETFs) suit your long-term goals. You’ll also need to look at the risk of your investments and find a level you’re happy with. Then check if you’re fine with the level of fees you’d be paying. You can find more details on stocks and shares ISAs here. 

Initiating the transfer

Contact your new ISA provider and let them know you’d like to transfer your cash ISA to their stocks and shares ISA. You should be able to do this by going online to their site, where they’ll have an ISA transfer section and a form you can fill out. Your new provider will ask for details of your current ISA, like your account number. Then they’ll handle the process of opening your new stocks and shares ISA and begin the transfer. 

Provide your documents

For security and to prevent money laundering your provider may ask for ID, like a copy of your passport and proof of your address. 

Wait for it to complete

Your new provider will contact your current cash ISA provider, move your cash to your new stocks and shares ISA and buy your investments, if you’ve already chosen them. The time this takes will depend on your providers. Once the transfer is complete your new provider will let you know. Then you’re free to use your money to buy and sell investments within your ISA. 

Before you transfer to an ISA, it’s important to look at the pros and cons. Stocks and shares can offer potentially higher returns than cash savings over the long term. You can also spread your investments across different asset classes like shares or bonds, tailoring them to your risk level and financial goals. 

This risk is one of the big drawbacks of a stocks and shares ISA. While a cash ISA offers safer fixed or variable interest rates, investing comes with ups and downs based on the performance of financial markets and the global economy. The value of a stocks and shares ISA can fall as well as rise and you may get back less than you’ve invested. 

Stocks and shares ISAs often come with management and transaction fees, which can eat into your returns over time – so it’s important to know how they work. 

You can choose to transfer a stocks and shares ISA to a cash ISA if you’re looking to reduce the risk to your savings. We have more information on how to decide which ISA is right for you. 

Tax implications

As we’ve mentioned, if your ISA provider manages the transfer you’ll keep the tax benefits of your ISA. When your money is invested in your new stocks and shares ISA, income from dividends, interest, or capital gains will be free from UK income tax and Capital Gains Tax. You can also buy and sell investments inside your ISA without paying tax on money you’ve made. 

If you’re unsure if a stocks and shares ISA fits your plans, we’d recommend speaking to a financial adviser, there will usually be a charge for any advice.