How to Transfer a Cash ISA to Share ISA
ISAs, or individual savings accounts, are investment products available to all residents of the United Kingdom. There are two sorts of ISA: the cash ISA and the stocks and shares ISA. The cash ISA enables you to save a certain amount of capital each year and avoid paying tax on earnings accrued via the interest, while the stocks and shares ISA permits investment of a certain amount in the stock market from which interest gained on the profits is exempt form tax. It is simple to transfer a cash ISA to a share ISA, although there are some regulations.
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Instructions
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Research thoroughly the available share ISAs into which you can transfer your cash. Some may only accept a minimum amount, while others can levy a fee for acceptance of a transfer.
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Consider the two available forms of a share ISA. Either you buy individual shares yourself and hold them in the ISA, or you charge the service provider with the task of investing your money in the stock market.
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Contact the service provider of the ISA to which you wish to transfer. The new provider will contact your current ISA provider to effect the transfer. Applications are usually accepted by telephone, mail or online (although you will have to sign a postal form as authorization).
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Transfer the full amount of your cash ISA holding if making the change within the same tax year. If transferring capital from a previous year's cash ISA, you may be able to perform a partial transfer, although the share ISA provider may have limitations on amounts they will accept. You can invest up to 10,200 pounds in a share ISA per year, although the maximum allowed in a single cash ISA is 5,100 pounds.
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Review your share ISA at the end of each tax year and compare its performance with similar products; your shares may be underperforming in comparison.
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Tips & Warnings
Be aware that share ISAs have the potential to provide greater gains on your investment than a cash ISA. However, this does depend on the performance of the stock market; your investment can also decrease in value.
Once the transfer to the shares ISA has been completed, you cannot transfer the capital back into a cash ISA.
Never withdraw your capital from an ISA to transfer it to another ISA. If you do it will invalidate your current tax year allowance.
References
- Photo Credit stocks and shares image by Warren Millar from Fotolia.com
