Does transferring an ISA count as opening a new one?

Having multiple Individual Savings Accounts (ISAs), you may want to explore whether transferring them may impact your finances and annual allowance. With five different types of ISAs available, you may also be curious about the rules and benefits of transferring or merging them together.

An ISA is one way to invest your money tax efficiently. There’s no UK income Tax or Capital Gains Tax that will zap away at the money you earn. The five types of ISAs are:

• Cash ISA
• Stocks and shares ISA
• Junior ISA
• Lifetime ISA
• Innovative finance ISA

But it's important to recognise that tax benefits are subject to change, interpretation and depend on the individual's circumstances.

No. Neither transferring nor renewing your ISA count as a new ISA. Even if you haven't paid anything into your ISA for over a whole tax year (6 April to 5 April the following year), you can restart contributions into your existing ISA again.

Some of the five types of ISAs may be transferred, like a cash ISA to a stocks and shares ISA (or vice versa). But it’s worth noting that:

1. you can’t always transfer from one type of ISA to another. For example, you can't transfer from a Junior ISA to an adult ISA, unless you are the child reaching age 18.
2. you'll pay a 25% fee, if you transfer your Lifetime ISA to a different type of ISA before reaching age 60. ^{Footnote [1]}  
3. the effects of inflation will reduce the buying power of your money over time. This is particularly important in a cash ISA if the interest rate is less than the rate of inflation.

The value of investments can fall as well as rise, and you could get back less than the full amount you invest in your ISA. 

Check out our article to learn more about how ISAs work and compare the different types. 

“For those who have multiple ISAs scattered across providers,” says Alistair McQueen Head of Savings and Retirement at Aviva “merging your ISAs means having your whole balance in one place. This makes it easier to keep track of how your ISA is performing and keeps the admin to a minimum with one set of paperwork (and less passwords to remember). Perhaps most importantly, you won’t pay any UK Income Tax or Capital Gains Tax on any returns made and transferring won't impact your ISA allowance for the year."

The key benefits in transferring one type of ISA to the same type of ISA are:

• easier to manage with the whole ISA balance in one place 
• can see how it’s all preforming at a glance 
• fewer passwords to remember
• one set of paperwork 
• one set of investment charges 

But it's also worth remembering that there may be some limitations, like charges you may need to pay your previous provider.

Following the rules when transferring an ISA is important so that you avoid any chance of increasing the amount of tax owed. 

Cash ISA rules are like those for stocks and shares ISAs, which are that: 

1. you can transfer funds between different types of ISAs, like transferring your cash ISA to a stocks and shares one. But, you might need to check with your new provider if they accept the type of transfer you’d like to make. 
2. transfers don’t affect your annual ISA allowance. Every tax year, which runs from 6 April to 5 April, you can save up to £20,000 in one account or split the allowance across multiple ISA accounts. ^{Footnote [2]} Check out GOV.UK for examples and details on ISA tax allowances.
3. you may be charged fees for transferring your ISA to another provider. So, make sure to check the providers you’re transferring from and to for all fees linked to the transfer. 

No. You could transfer an ISA worth over £20,000 at the beginning of the tax year and then contribute up to £20,000 to your new ISA in that year. The exception is a Lifetime ISA, which has a maximum annual allowance of £4,000, within the whole £20,000 per year ISA allowance.

If you don’t currently hold an ISA, you’ll need to open a new one to pay in the funds. As of 6 April 2024, however, the ISA rules changed so you can now have and contribute to as many ISAs as you’d like (except for Lifetime ISAs and Junior ISAs). But keep an eye on the £20,000 ISA allowance because you won’t be allowed to contribute more than that across them all. 

Reasons to transfer an ISA

As with any investment product, investment based ISAs can down as well as up and you can get back less than what you put in. But there are reasons to keep your eye on the market and perhaps take stock of whether transferring may be right for you: 

1. Lower fees – some providers simply charge lower annual management fees or transaction costs. Keeping a watch on competitive fees could help you reduce costs and may increase your overall returns in the long run. 
2. Higher interest rates – for some, the priority may be to get better interest rates or promotional offers on their ISA through a different provider. 
3. Different investment options – for those with stocks and shares ISAs, finding access to a wider range of investment options may be a priority. 
4. Combine and manage – reducing the administration and management that comes with having multiple ISAs may be an attractive option. If you have ISAs with numerous providers, transferring them to a single provider could make it less of a hassle to manage your savings or investments. 
5. Changes to financial goals – financial goals and life circumstances may change over time. This might mean that your current ISA no longer fits your needs, aligns with your goals, or meets your approach to risk. When this happens, it may be time to look at a different ISA that matches your new expectations.

When should I transfer my ISA?

You can transfer an ISA at any time. Ultimately, it’s a personal decision that should fit within your timeline. But you may want to set aside some time to speak to new providers, research your options, and fully understand the process.