The Fixer: Cash ISA transfer fail

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Dear Fixer,
A couple of weeks ago I decided to switch my cash ISA from Barclays to Nationwide Building Society to get a better interest rate.

I withdrew the money I had saved up - about £8,000 - and went to Nationwide to open my account.

However, it told me that I could not pay in the full amount, even though all the money was paid into my Barclays account between 2010 and 2012, because my cash ISA allowance for this tax year is £5,760.

Is there any way I can open another ISA with the full £8,000?

N Stone, Manchester

Dear Mrs Stone,

Unfortunately, you do lose the tax breaks on ISA funds that are physically withdrawn from a cash account.

This is designed to ensure that people do not exceed their ISA allowances and is the case both for funds built up in previous tax years and money invested since April 2013.

To protect the tax-free status of your money, you should have instead opened an account with Nationwide before closing your Barclays account, and asked Nationwide to arrange a transfer for you.

This is the approach you should take if you decide to switch again. However, it will not help you this tax year I'm afraid, as the most any cash ISA provider will allow you to pay in is £5,760.

f you are still happy with the Nationwide account, I would therefore suggest paying in this amount now and adding the extra funds on or after April 6, which is when the new tax year starts.

The total amount you can invest in a cash ISA between April 6 2014 and April 5 2015 is £5,940, so you will still be able to add almost £2,000 to your account over the course of that tax year should you wish.

The Fixer

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