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ISA jazz

Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
So I have two ISAs, a Cash ISA and a E-ISA.

Apparently you're only supposed to have one ISA, and are only allowed to invest £5,100 in a tax year.

So why did my bank allow me to open a second ISA? Furthermore, I have saved in both of them probably more than £5,100 this tax year, so why has my bank allowed me to do that?

I did call them up and ask - according to them, its my fault, and I should call the tax people.

For the sake of argument, lets assume there is a cock up here and that I am responsible for it (although realistically...) what is going to happen? Am I gonna get my kidney stolen by repo men because of a few hundred pounds? Or will they just send a letter and have me declare it and have it taxed?

Also, investing cash into an ISA is one thing, but is moving money from one ISA to another ISA still the same thing? I doubt it could be, because you're not reinvesting the money twice, you just moved it...

Anyway, help would be helpful, especially since the tax people don't open til monday and this will be on my mind all weekend.

Comments

  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Not sure how it will work with regards to the declaration of having two cash ISAs, I imagine if you have invested more than the £5100 you will have to pay tax on whatever you have paid over that?

    I had a chat with my bank earlier this month as I have maxed out my current ISA. I am not just putting savings into a plain old savings account. I could open a stocks and shares ISA in which you can save £5100 again but its slightly risky business and youre best to leave it untouched for a minimum of 5 years.

    I also asked if at the start of the new financial year I could start a new ISA (they do reccommend looking for the best deals as rates on ISAs generally only apply for a 12 month period) and start it with my current ISA balance plus what I had accrued in my savings account and they said no so I would assume you cannot add the balance from another ISA into one which has already reached it's yearly limit of £5100.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Hey there,

    ISA's can be confusing at times so understandably you are worried about this.

    You can have more than one ISA a year but there are rules about how many you can have and how much money you can save in them.

    You can open two ISA's each tax year; one cash ISA and one stocks/shares ISA. You can save a total of £10,200 each tax year in ISA's but only £5,100 of this can be cash. (From April 2011 the ISA limit is increasing to £10,680 of which £5,340 can be in a cash ISA). If you have more than your ISA allowance this will be taxable. So find out what type of ISA you have first and then calculate whether you are over the allowance.

    You can open new ISA's with different providers each tax year. You can also make transfers between ISA providers. However, there are rules about this too. You may find this fact sheet on the HMRC website useful.
    If you scroll down to the 'Transferring an ISA' section. Essentially the transfer takes place between the providers with your instruction. If you close an ISA and open another one, you will loose the tax benefits.

    I hope this helps. :)
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    The whole one ISA a year thing is slightly confusing, as it actually means one ISA provider rather than one ISA account (or at least generally does on a functional basis.

    For e.g. if you banked with the National Bank of Monster Land (NBML), you could legitimately put £4000 in one tax year into an ISA super saver account, and then use up the rest of your allowance of £1100 by putting that into an instant access saver account also with the National Bank of Monster Land.

    What you can't do is open one ISA account to National Bank of Monster land and one ISA account with AlienBank in the same tax year.

    Then within the National Bank of Monster Land accounts, you can only add £5100 to your ISA savings each tax year. Any money that was already in ISA accounts from previous tax years can stay as tax free stuff, the limit only applies to what you put in this tax year.

    E.g. you could have £10,000 in ISA accounts, because last year you put £5000 in and then this year you've put another £5000 in.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    The whole one ISA a year thing is slightly confusing, as it actually means one ISA provider rather than one ISA account (or at least generally does on a functional basis.
    I always thought it was one account only, but I could be wrong.

    Although you can invest in a cash ISA and a stocks and shares ISA in the same year, it looks like you have subscribed to two Cash ISAs which is not allowable. You cant blame the bank as they dont always check what other accounts you have open.

    You can transfer money from one account to another but the rules are bit specific. You can transfer either this years subsciptions only or the full balance fo your ISA to another account. Transfers In/out to other providers also depend on each banks T&Cs. When I used to work in ISAs the system used to check for overpayments made to each indivual ISA and the funds had to be sent back to the investor.

    As for subscribing to ISA's. There is a reason why you cant open an ISA without your National Insurance number! HMRC get reports on a set basis for susbcriptions linked to you NI number and any duplicated subscrptions are picked up on. You can either contact them and admit to it or wait for them to catch up with you and void one of your ISAs. This will lead to the second account being shut, any interest earnt being taxed and the money returned to you.

    The procedures might have changed a bit since I worked with the product, so you need to speak to your bank.
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