Everything you need to know about ISA transfers

The what, when and why of transferring your account.
Everything you need to know about ISA transfers
July 27, 2021

Table of contents

ISAs are sticky things.

You open one, make a deposit and then forget there are lots of other companies offering them too. 

Ten years down the line and you’ve been glued to the same provider without even thinking about it.

But you can actually transfer an investment ISA to another company. 

There are some stocks and shares ISA transfer rules to be aware of though. We’ll try to cover them all in this guide.

When to consider a stocks and shares ISA

You may be reading this and wondering what an ‘ISA’ actually is. 

ISA stands for ‘individual savings account’.

They are tax-efficient accounts designed to help you save. The ‘stocks and shares’ variety let you invest money in different investment products. Many people use them as part of their portfolio diversification, both in terms of the assets they invest in and the account type.

You have an annual ISA allowance. This is the amount of cash that you are able to put into an ISA each tax year. For now, the annual allowance is £20,000.

There are several types of ISA but the most popular one for investing is a stocks and shares ISA, sometimes called an ‘investment ISA’.

Stocks and shares ISAs are a good option for anyone looking to invest as tax efficiently as possible. With some exceptions, any capital gains or dividends you receive in an ISA will be exempt from taxation, which is their main appeal.

Of course, the amount you plan on investing and your ultimate goals impact things too. You may also want to look at whether a SIPP or ISA is right for you — it could even be both.

If you’re unsure as to what you should do then have a read of our guide to individual savings accounts.

New to investing?

If you are thinking about opening an ISA or are just starting to invest then read our beginner’s guide to investing in the stock market

It’s got some useful tips on account types, judging risk and learning how much you should aim to invest.

Annnnd….now on to ISA transfers.

What is an ISA transfer?

An ISA transfer is a way of moving your existing ISA to another provider or changing your existing ISA to another type with the same provider.

For example, you could move a stocks and shares ISA from your bank to a stockbroker. The account type remains the same but the provider has changed.

Alternatively you could transfer from a cash ISA into a stocks and shares ISA. You could do this with the same provider or move to a different one.

When to consider transferring your ISA

There are lots of reasons why people transfer their existing ISA to another provider. 

The most common ones are...

  1. Lower trading costs.
  2. Lower fees.
  3. A wider range of choice, such as more shares to invest in.
  4. A better product, like an app or web platform that you prefer using.
  5. Customer service that aligns with your needs.

Which ISAs can I transfer?

Transferring existing stocks and shares ISA to another provider

A stocks and shares ISA transfer between providers isn’t too hard to do.

An ISA transfer should be handled by the provider you’re moving to, so check with them to see how you can start the process.

The first thing to be aware of is a possible exit fee.

This a fee you may have to pay for moving your ISA from one provider to another. It will be charged to you by your existing provider.

Make sure you know if you’ll have to pay one before you do anything.

The actual ISA transfer process can take two routes:

  1. ‘In specie’ transfer 

This is a fancy way of describing an ISA transfer that will keep your existing investment portfolio intact and move it to another company.

So if you were wondering, “Can I transfer shares into an isa from another ISA?”, the answer is ‘yes’, if you do an ‘in specie’ transfer.

One key point to remember is that in specie transfers tend to take longer than cash transfers. 

In specie transfers can take around six to eight weeks, whereas cash transfers usually take about four weeks. 

  1. Cash transfer

This is where your existing holdings are sold and the resulting cash is transferred to an ISA with another provider.

Cash transfers are generally faster than in specie transfers.

Transfer cash ISA to a stocks and shares ISA

You can transfer a cash ISA to a stocks and shares ISA.

You can do this either internally or between providers.

The provider you’re transferring to will usually facilitate the transfer for you, so it’s just a case of speaking to them and filling out any requisite forms to make it happen.

Transferring an innovative finance ISA to a stocks and shares ISA

You can transfer an innovative finance ISA to a stocks and shares ISA. 

The obvious point to consider here is you won’t be able to keep your innovative ISA holdings — you’ll have to cash those in before you complete your transfer.

As with other ISA transfers, the provider you’re looking to transfer to is more likely to be the one that will facilitate the transfer for you.

Transferring shares from a brokerage account into a stocks and shares ISA

You cannot directly transfer shares from a general investment account into a stocks and shares ISA.

The reason for this is fairly simple. If you could transfer all your taxable investments into a tax efficient account, that would be a rather obvious tax avoidance loophole.

But that doesn’t mean it’s completely impossible to get shares you hold into an ISA.

The most common method to do so is via what’s known as a ‘bed and ISA’.

This is where your provider sells off the shares you hold in your general investment account and buys them back in an ISA. This can take a few days and you’ll be out of the market during the transaction.

There are some costs and limitations to performing a bed and ISA.

  1. The bid/ask spread — All stocks are bought and sold at different prices. The difference between them is known as the bid/ask spread. When you perform a bed and ISA, you’ll be selling at a low price and buying at a high one. Sometimes this difference can be a small amount but for other stocks it adds up to a lot of cash. 
  2. Tax — You cannot avoid tax by simply selling stocks and buying them back in an ISA. For example, if you make a taxable £5,000 profit from selling shares in a general  investment account, you can’t avoid that possible tax liability by buying back shares in an ISA.
  3. ISA allowance limit — The ISA allowance may be the biggest limit on your ability to transfer shares into an ISA. For the current tax year, you can only invest £20,000 in a stocks and shares ISA. So if you have £100,000 worth of shares, a bed and ISA isn’t going to help you move all of them into an ISA. You’ll only be able to buy £20,000-worth of them.

Ultimately lots of people try to move their shares into an ISA because they want to reduce their tax bill from then on. So if you’re looking for tax efficiency then read our guide on how to pay tax on investments in the UK.

How to transfer an ISA

Most of the technical side of an ISA transfer will be handled by the companies offering the accounts to you.

To complete an ISA transfer, you’ll need to:

  1. Identify another provider or account type to transfer to. 
  2. Calculate annual ISA fees you’ll be paying
  3. Find out if you'll have to pay any exit fees to your current provider.
  4. If you do have to pay exit fees, check if your new provider will cover the cost of them.
  5. Open an account with the new provider.
  6. Fill out a transfer form for your new provider.

How to make an in specie ISA transfer

Not all ISA providers offer in specie ISA transfers, so if you want to perform one then you’ll have to be sure your provider offers them.

If they do then you’ll have to specify that you want this to be done. You can see a simple example of this on the Freetrade ‘transfer ISA account’ form.

How to make a cash transfer

Making a cash transfer is simple. When filling out your ISA transfer documents just specify that you want to make a cash transfer.

Watch out for exit fees

Exit fees can eat into your portfolio massively. 

Some providers are known to charge hundreds of pounds as an exit fee. 

So make sure you aren’t going to pay a lot for leaving. You can even ask your new provider if they’ll cover all or some of your ISA exit fee.

ISA transfer rules

Can I transfer just part of my ISA?

You can only transfer part of your ISA if it was opened in a previous tax year. 

If you open an ISA and want to transfer in the same tax year then you’ll have to transfer the whole thing.

How does a transfer affect my ISA allowance?

An ISA transfer does not impact your allowance. This is true if you do an in specie transfer or a cash transfer.

How long does the ISA transfer take?

How long your ISA transfer takes will depend on the method of transfer you choose.

A cash transfer usually takes four weeks. 

An in specie transfer usually takes six to eight weeks.

This will vary depending on the provider you use, so check with them to find out more about timings.

Can I withdraw money from my stocks and shares ISA?

Yes, once you sell any shares you hold then you can withdraw them as cash.

But be careful here. The moment that cash is out of your account, it loses its tax-efficient status and if you want to deposit it again, it will form part of your annual allowance.

It is worth noting that if you deposit cash and don’t invest it, you can withdraw it without it impacting your allowance. But this isn’t always the case.

Some providers offer flexible stocks and shares ISAs. This means you can deposit and withdraw money in the same tax year and your allowance will be adjusted accordingly.

Other ISAs are not flexible. This means any money you deposit contributes to your allowance. Take out money and your allowance will not be adjusted accordingly. 

As an example of the difference between the two, imagine you have an allowance of £20,000. 

You deposit £20,000 in cash and then decide you only want to invest £10,000, so you withdraw £10,000. 

In a flexible ISA that will mean you still have an allowance of £10,000.

But if your ISA is not flexible then the £20,000 deposit will mean you’ve used all of your allowance for the tax year.

Can I transfer an ISA to a SIPP?

No, you cannot directly transfer your stocks and shares ISA to a SIPP.

You could sell your ISA holdings and then buy them back in a SIPP, much like a bed and ISA though. 

Can I transfer money from one ISA account to another?

Yes, it is possible to transfer cash from one ISA to another.

You have a couple of options available to you. 

The first is if the cash you’ve got is from an ISA that you’ve held since at least the previous tax year. If that’s the case then you can move the desired amount of money over to another ISA via a partial transfer.

If you want to transfer cash in the same tax year that you opened the account then you’ll have to transfer all of your holdings.

It’s really important to remember that if you withdraw cash from one ISA and then deposit it into another, that deposit will count towards your annual allowance. So if you want to remain as tax efficient as possible then it can be much wiser to use an ISA transfer.

Can I transfer my ISA to my children or spouse?

ISAs can be inherited by your spouse but you must have been married to them or in a civil partnership with them. This is done via an inherited ISA allowance.

Your children can inherit your ISA holdings but they will not retain their tax efficient status if they do.

Inheritance tax is a complex subject and ISAs are no exception. If you are interested in learning more about the subject then it’s worth speaking to a financial advisor before you make any big decisions.

When is the best time to transfer an ISA? 

There is no ideal time to transfer an ISA. 

The end or beginning of a tax year may mean the process takes longer as more people are thinking about their ISAs at that time, leading to more work for providers. But even this isn’t necessarily going to be a problem.

How many times can I transfer my ISA?

You can transfer your ISA as many times as you like — there are no limits. 

Once the transfer is completed

Once you’ve completed your stocks and shares ISA transfer you’ll be free to invest in ETFs, UK and US stocks and shares, investment trusts and any other assets with ISA eligibility, depending on what your provider offers on their platform.

Just remember you have an annual allowance to be careful of and it cannot roll over.

In the meantime, happy investing and let’s hope you’re on your first steps to being an ISA millionaire.

Important information on SIPPs

SIPPs are a pension product designed for people who want to make their own investment decisions. You can normally only access the money from age 55 (set to rise to 57 from 6 April 2028).

This article is based on current rules, which can change, and tax relief depends on your personal circumstances. When you invest, your capital is at risk.

The value of your portfolio can go down as well as up and you may get back less than you invest.

Before transferring a pension you should ensure you will not lose valuable guarantees or incur excessive transfer penalties. Pensions are usually transferred as cash so you will be out of the market for a period.

Freetrade does not currently offer drawdown products for our SIPP.

Important information

This should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice.

When you invest, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.

Eligibility to invest into an ISA and the value of tax savings depends on personal circumstances and all tax rules may change.

Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).

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