Personal Finance & Money Asked on December 8, 2021
I’m trying to understand the restrictions on putting money into cash ISAs in the UK. Currently, the government homepage says "Every tax year you can put money into one of each kind of ISA. The tax year runs from 6 April to 5 April." (where cash is one of the ‘kind’s).
However, I’ve opened a cash ISA (in this, 2020/2021 tax year) with a building society (name withheld) and so far the customer service is dreadful; it’s a long story, but essentially the account is still not fully open. As a result, I’ve put no money in and the balance is zero.
Can I tell them to close the account and open another with a different provider, in the same tax year, legally, since I haven’t credited any money yet? The government advice seems kind of open-ended, but many other sources, such as Martin’s Money tips, say "According to HM Revenue & Customs rules, you can only have one current year’s cash ISA open at any time." (what does that even mean? what’s a "current year ISA"?).
I looked at this question, but it deals with transfers, which is not my focus.
Yes, you can.
You can close the account, with no balance, and open a new account with another provider, and the new account will be your 'active' ISA for the current year.
Even if you have paid into the account in the current year, you can transfer it to another provider, and then add further funds up to the annual limit.
(Not all ISAs will allow transfer in or out, or may have notice conditions.)
If you've already paid into, say, a cash Isa and see a better rate on the market, you may still be able to take advantage of it by transferring your Isa savings to the new provider.
... to move money you've paid in the current tax year, you must move all of it.
The only difference is that transferring any funds keeps their ISA tax-free status; withdrawing funds takes them out of the ISA tax-free status - unless you withdraw and deposit back into the same flexible ISA.
Answered by Owain on December 8, 2021
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