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I’m looking at opening an ISA (stock & shares), and I started wondering what happens with the perks (tax free) when I move ISA accounts around.

For simplicity let's assume that ISA allowance is constant at £20K and I always use it all.

If in tax year 2018/19, I have an ISA (stock & shares) with provider Alpha, and the next tax year 2019/20 I have opened another ISA (stock & shares) with provider Bravo for whatever reason (lower platform costs or something), what will happened if in the middle of tax year 2019/20 for some reason I’m not happy with my Alpha provider (ISA 2018/19)? Can I move this ISA (2018/19) to some other provider or am I stuck with them? Will I lose my tax free perk for that £20K as I have already reached the £20K allowance with provider Bravo?

How does this work? Do I need to keep an ISA with the same provider year after year?

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It's done through a transfer ISA form - handled by the providers (the one you are moving to)

You have to move it all in one go from one provider to another, and this will not affect your yearly ISA limit.

https://www.gov.uk/individual-savings-accounts/transferring-your-isa

It has to be done this way, if you took it out manually and tried to put it back in you would use all your 20K allowance (or if your ISA was larger than 20K, would not be able to move it all)

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    Unless we're talking about money deposited in the current tax year, you don't have to move it all in one go. Many providers allow partial transfers of past years' contributions, and you can split as many times as you like. Those that don't are typically in some kind of restricted-access product (like a fixed-rate savings bond) which forces you to close the account if you withdraw. – user1908704 Nov 6 '18 at 23:45
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All transfers are 'pull' from the new provider (via web or paper forms), not 'push' from the old. Manual withdrawing will lose your allowance. There's a couple of other things to be aware of here:

Current tax year's contributions: must move them all to a new provider together. You can only have one ISA of each type (cash, S&S, LISA, IFISA) containing current year's contributions.

Past tax year's contributions: you can (usually) transfer any fraction of them to a new provider. You can split up your money however much you like. You can have a hundred different ISA accounts for past years' money if you want.

Flexible ISA: some (mostly cash) ISAs allow you to withdraw money and redeposit it before the end of the tax year without it counting against your allowance. For example, you start the year with a £20K allowance and a balance of £10K in your ISA. You withdraw £7K, leaving £3K balance. Your allowance now goes up to £27K, meaning you can redeposit up to that much before your ISA is full for this year - so your maximum balance at the end of the year would still be £30K.

In non-flexible ISAs, withdrawn money can't be put back - so after withdrawing £7K your allowance would still be £20K, and your maximum balance for the year would be only £23K.

Only cash deposits count against your allowances, interest/dividends/capital gains don't affect them.

  • Under "Current tax year's contributions", would "You can only contribute to one ISA of each type" (instead of "have") be slightly clearer/more accurate? – TripeHound Nov 7 '18 at 7:44
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    No - you can contribute to >1 ISA of a given type for the current year, you just have to close the first one when transferring to the second one. I clarified the wording to refer to an ISA that holds contributions from the current year. – user1908704 Nov 7 '18 at 14:52
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Do I need to keep an ISA with the same provider year after year?

No. You can change provider, keeping both current and past years' allowances intact.

You can transfer the whole sum between providers, or as other answers have pointed out, you may be able to transfer portions of previous tax years' contributions.

Because your question refers to Stocks & Shares ISAs, it's worth pointing out that you can usually choose to transfer either as stocks or as cash – there are different quirks to each method:

  • stock transfer is simplest and means you stay invested, although the flipside is that you can't sell any holdings during the transfer

  • cash transfer means your investments are sold, moved to your new ISA provider and then you have to buy again. So it's stable if you suspect the market is falling but you have the dealing costs to contend with.

With either method – your money stays in the ISA wrapper so your previous years' allowances are intact and your current tax year's allowance (i.e. for new subscriptions into any ISA) is unaffected.

It's contingent on you initiating the transfer with the new provider (i.e. for the cash method, you cannot withdraw cash then try to bring it to a new provider as that would relinquish your previous years' allowances and use up your current year's).

Just check with your current ISA provider that there are no exit fees though. Some do have them, and you typically only notice when you want to leave.

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