Stocks And Shares ISA Transfers (2024)

A stocks and shares individual savings account, also known as an investment ISA, is a tax-efficient wrapper in which a range of different investment products can be held.

These include individual shares, exchange traded funds, unit trusts and investment trusts. Any money earned within a stocks and shares ISA is paid free from capital gains and income tax.

Because stocks and shares ISAs carry risk, they should be viewed as a medium to long-term investment. This means you should be prepared to invest your money for at least five years, preferably longer. Although it’s possible for stock market investments to produce competitive returns, there are no guarantees and you could get back less than you originally invested.

Tax treatment depends on one’s individual circ*mstances and may be subject to future change. The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of tax advice.

You can pay the full annual ISA allowance of £20,000 a year into stocks and shares ISA – or you can invest some of it into a stocks and shares ISA and divide the remaining allowance across other types of ISA.

These include cash ISAs, innovative finance ISAs or lifetime ISAs (you can only pay a maximum of £4,000 into a lifetime ISA each tax year).

A new ISA –the British ISA– was also announced in the2024 Budget. It will allocate a further £5,000 tax-free allowance for investment in UK equities (outside an ISA, the purchase of stocks or marketable securities is subject to stamp duty at the rate of 0.5%). This is in addition to the current £20,000 tax-free allowance. The British ISA is in consultation phase until June 2024.

If you don’t use your full annual ISA allowance, you cannot carry it over to the next tax year.

How do stocks and ISA transfers work?

As with cash ISAs, it’s possible to transfer a stocks and shares ISA to another provider. But there are certain rules you must follow.

For a start, you’ll need to check which providers allow transfers in. Although all ISA providers must allow you to transfer your funds out of your ISA, not all will accept transfers in – though this is more likely if you are transferring in from a major ISA provider such as AJ Bell, Fidelity or Hargreaves Lansdown.

If your chosen ISA provider does not permit transfers in, you can still open a new ISA with that provider, while leaving your existing ISA where it is. But this will be on the condition that you haven’t paid into your existing stocks and shares ISA in the current tax year.

In fact, you can open a new ISA with a new provider each tax year if you choose to. But the key rule is that you cannot pay into more than one of the same type of ISA each year. For example, you wouldn’t be able to pay into two different stocks and shares ISAs in the same tax year. But you could pay into one stocks and shares ISA and one cash ISA – so long as you don’t exceed your annual allowance.

If your new provider does allow transfers in and you are transferring money invested in the current tax year, you must transfer all of it to your new stocks and shares ISA. You can then top it up to the current ISA allowance.

For ISA investments from previous tax years, you can choose to transfer all of it, or just part of it, and this won’t affect your current year’s ISA allowance.

You can also transfer money in from more than one ISA at one time and you can transfer your ISA as many times as you like – there are no limits.

From 6 April 2024, however, savers are able to open and pay into multiple ISAs of the same type within the same tax year, and make partial ISA transfers.

To carry out your ISA transfer, you’ll first need to find a provider to transfer to. Be sure to check whether your existing provider charges a fee for transferring out as this can be hundreds of pounds. In some cases, the new provider might offer to cover these costs.

Once you’ve found the right provider, you’ll need to fill in a transfer form. Forms can usually be downloaded online but you might need to post the form back to the provider.

There are then two ways to transfer your stocks and shares ISA to another provider.

The first is an ‘in specie’ transfer which can also be called ‘re-registration’. This is the process of transferring investments to your new provider rather than selling down your investments and moving the proceeds across as cash. You can usually choose this option if your new provider offers the same investments.

The downside of in specie transfers is that they can take longer, typically up to six weeks. You might also have to pay exit fees to your existing provider.

The second option is a cash transfer. Here, your investments are sold and the proceeds are passed on to your new provider. The ISA status of your cash remains in place, and your new provider will then reinvest your money as requested.

This type of transfer is usually faster, typically taking up to 30 working days. But because your money is out of the market, you could miss out on some of the gains if shares go up.

Bear in mind that when comparing ISAs, there’s no one-size-fits-all option, so you’ll need to consider what’s most important to you. This might be finding the very best deal available, even if it means you can’t transfer in existing ISA funds. Or you might feel that ISA transfers are more important.

Whatever your circ*mstances, it could be sensible to get advice from an independent financial adviser before proceeding to be sure you’re making the right informed decision. They can help you find the right deal and also help you choose the right investments, however bear in mind this advice comes with a fee.

What is a flexible ISA?

With a flexible ISA, you can take money out of your ISA and pay it back in within the same tax year, without it affecting your annual allowance. For example, if you invested £20,000 into your stocks and shares ISA in May and then withdrew £10,000 in August, you could reinvest this £10,000 before the end of the tax year.

However, the rules change if you want to transfer your ISA too. Should you choose to transfer all of your ISA to another provider, you won’t be able to reinvest any amount you’ve withdrawn from your old ISA under flexible ISA rules. Any payments you make into your new ISA will count towards your current year’s allowance.

If you’ve only transferred part of your ISA, you might be able to reinvest any funds you’ve withdrawn. But this must be with your original provider and not the one you’re transferring to.

What are some ISA transfer benefits?

There are a number of benefits to carrying out an ISA transfer. You might find a stocks and shares ISA that better meets your long-term investing goals. Or you might find one that offers lower fees or dealing commissions.

Transferring your current ISA could also enable you to benefit from better customer service. And, if you have more than one ISA, transferring them to the one place can make it easier to track and monitor your investments.

Yes. Since July 2014 it has been possible to transfer a stocks and shares ISA to a cash ISA. You might wish to do this if you no longer want the risk associated with stock market investments.

To carry out your transfer, contact the cash ISA provider and fill in a transfer form. Never withdraw the money from your stocks and shares ISA yourself and pay it into a cash ISA as you risk losing its tax-free status.

It is also possible to transfer a cash ISA into a stocks and shares ISA. However, remember that stocks and shares ISAs are higher risk than cash, it’s not a decision to be taken lightly.

It might be better to keep some of your money in a cash ISA and then open a separate stocks and shares ISA. Seek financial advice if you’re unsure.