How to transfer a stocks and shares ISA

A stocks and shares ISA provides a tax-free way to invest. With an ISA you can avoid paying
capital gains or dividends tax, on any returns you earn.

While anything held in an ISA stays tax-free year after year, you are limited as to how much
you can put into an ISA in a single tax year.

For the current 2022/23 tax-year, the annual ISA allowance is £20,000, and it’s stood at this
level since 2017/18. Importantly, if you don’t use your full allowance in any given tax year
you can’t roll it over into the following year’s allowance.

ISA types

There are four types of ISA, and a stocks and shares ISA is just one of them. Other types of
ISAs include:

• Innovative Finance ISAs
• Cash ISAs
• Lifetime ISAs (max investment £4,000 per year)

An ISA transfer simply refers to the process of moving your ISA to another provider, without
losing the tax-free benefits.

If you already have a stocks and shares ISA there are several reasons why you might wish to
transfer your ISA.

1. Dissatisfied with levels of customer service. If you’re unhappy with the level of
   customer service provided by your current provider you may be tempted to switch
   providers, especially if you’ve recently had a bad experience.
2. Unhappy with fees. Dealing fees, annual platform charges, and levels of commission
   can vary massively between stocks and shares ISA providers. So, if you believe your
   provider is too expensive, you may be tempted to seek a cheaper platform
3. Seeking more investment choices. If you’re currently with an ISA provider that only
   has a limited number of investments to choose from, you may wish to transfer your
   ISA to a provider that boasts a wider choice of funds.
4. Wanting to change your ISA type. It’s possible to transfer a cash ISA – or other type
   of ISA – into a stocks and shares ISA (or vice-versa). So, if you’re looking to change
   the type of ISA you hold, you’ll need to transfer your existing account.

If you want to transfer your stocks and shares ISA to another provider, it’s worth knowing
there are essentially two kinds of transfer you can make.

A cash transfer is arguably the most straightforward option. This transfer type is where your
new provider sells your investments, and then transfers them to cash for a limited period. It
will then re-invest this sum for you once your transfer is complete.

The risk with this type of transfer is that you’ll miss out if share prices rise over the time it
takes to complete your transfer.

An ‘In specie‘ transfer is another type of ISA transfer. This is where you stay invested during
the whole process of moving your investments to another provider.

This means you won’t miss out if shares rise during the transfer process. However, this type
of transfer usually takes longer than a cash transfer.

Transferring a stocks and shares ISA is relatively straightforward. Once you’ve found your
new ISA provider, you simply need to inform them that you wish to transfer an existing
account.

To do this, you’ll usually have to complete an ‘ISA transfer form’. While you may be able to
do this online, some providers may request you to send a signature via post.

It may sound obvious, but if you want to move your ISA, never withdraw funds yourself. If
you do this, your investments will lose their tax-free status. Always follow the formal ISA
transfer process.

Some providers charge an ‘exit fee’ to those who transfer out their ISA to another provider.
If this if the case with your existing provider, make sure you understand the charges you’re
likely to face for transferring your account.

This is important as it may ultimately have an impact on whether you go ahead and transfer
across an ISA. For example, if you planned to move your stocks and shares ISA to a provider
solely because you want to save on fees, a steep exit fee may not make it worthwhile.

Warning: ISA Tax treatment may change in future