What can I do with the cash I have in a poor-paying Isa?

29 July 2014


I currently hold a cash Isa from last year, paying a poor rate of interest. I have opened another Isa for this tax year, which I am paying into. However, this provider does not allow transfers in from the previous tax year so what do you recommend I do with the money held in the poor-paying Isa from last year? Do I lose the tax-free allowance on this money (less than £300) if I close the account?
LE/East Sussex


Although you can only subscribe to one cash Isa – now called Nisas – per tax year, you are able to transfer previous tax year Isas to other providers of your choice.You do not have to transfer it into the one you have opened this year.

If you cash in your old Isa, you will lose the tax-free status of the money going forward, so you have a couple of options.

First, you can simply transfer the old Isa to the best paying Nisa you can find, which accepts transfers.This means that you can retain the tax-free status and improve the interest you are earning.

Second, if you are unlikely to use the full £15,000 Nisa allowance this tax year, and you would prefer to keep all the funds with one provider, you can cash in your old Isa, which will mean that you lose that tax-free allowance forever.You could then add these funds to the Isa that you already hold, using up some of the current tax year’s allowance.

If you are already likely to use the full allowance this year, the second option is not advisable.

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Anna Bowes is a founder and director at Savings Champion