Whilst you may subscribe to different types of ISA accounts within the same tax year, up to the £ 20,000.00 ISA allowance e.g., £ 10,000.00 in a Cash ISA and £ 10,000.00 in a Stock and Shares ISA, you cannot subscribe to 2 ISA accounts of the same type in the same tax year.
One ISA per type per year rule
This is known as the “One ISA of each type per tax year rule”, e.g., you cannot subscribe £ 10,000.00 into a Cash ISA with provider A and £ 10,000.00 into another Cash ISA with provider B in the same tax year. If you have subscribed into an ISA account and want to open a new account, with another provider, of the same ISA type, then you will need to transfer your existing ISA account to the new provider.
Example
If you subscribed £ 5,000.00 to a Stocks and Shares ISA with provider A, and you then open a new Stocks and Shares ISA with provider B and subscribe your remaining £ 15,000.00 allowance into that account, you will have breached HMRC’s ISA regulations. Once HMRC become aware of this breach, after both providers have sent their annual returns, HMRC may instruct one of the providers to void the ISA account they hold for you.
ISA Transfer In form
In the above example, you should tell provider B that you wish to transfer in an existing ISA account to them. To do this provider B will ask you to sign and complete an ISA Transfer form. As well as detailing your personal details, e.g., name, address, national insurance number and date of birth, the form will ask for details of the ISA account you are transferring in, e.g., the name of old provider, your old ISA account number, type of ISA account etc.
What can be transferred ?
Any of the 4 types of ISA accounts can be transferred to any other type, e.g., a Cash ISA can be transferred to a Stocks and Shares ISA, and vice versa. Note, you may have to liquidate the assets held in your ISA before transferring in to another type of ISA account, e,g., as a Cash ISA can only hold cash, then shares held in a Stocks and Shares ISA would need to be sold before transferring to a Cash ISA so that you are transferring Cash.
Also note that transfers into a Lifetime ISA will not receive the 25% government bonus.
In-Specie transfers
In-specie refers to transferring non-cash assets. If you are transferring a Stocks and Shares ISA to another Stocks and Shares ISA account, then you do not have to sell the shares held in that account, they can be transferred and held in your new account.
How long does an ISA transfer take ?
HMRC stipulate that for an ISA transfer providers should take no longer than 15 days to transfer Cash ISA‘s. All other types of ISA transfer have a 30 day deadline,
What happens to current year subscriptions ?
As part of the ISA transfer process, the old provider will send the new provider a notification confirming the amount of subscriptions you have made in the current tax year with them. The new provider will reflect that information on their platform, to stop you from inadvertently oversubscribing. The new manager will also now be responsible for reporting those subscriptions to HMRC.
Don’t self-transfer
If you are intending to open a new ISA account, do not close the old account and then open a new one with another provider. This is not way this should be done, and the assets you held in the old account will not be able to transferred into the new account. You will have lost the tax benefits for those assets.