ISA advice post Icesave

MikeEy

After hearing of the demise of Icesave I moved to open a new ISA this financial year. Wanting to get the most out of my tax free savings I went into auto pilot and immediately transferred £3,600 into my new ISA of "new" money. I have now received my money back from Icesave which includes savings from 07/08 but also some savings (and interest on those savings) from 08/09. I have not yet paid this into my new ISA but am now ready to (certificate in hand). If I do I believe I will have stupidly exceeded my cash ISA limit for 08/09. Being quite new to ISAs, I don't really know what to do about this situation. Should I just withdraw some of the £3,600 from my new ISA equivalent to the amount I'd paid into Icesave during 08/09? What about the interest? Any advice appreciated. Thanks

Baldur

Suggest ringing the HMRC ISA helpline - http://www.hmrc.gov.uk/leaflets/isa-factsheet.htm

Getting advice

If you have any questions about the tax rules for ISAs

• call our ISA Helpline on 0845 604 1701 (Monday -Thursday 8.30-5.00, Friday 8.30-4.30).

Please have the information about your ISA available when you call.

Icesaver

Prior to presenting the certificate to an ISA manager, the investor has made current tax year subscriptions of £2,000 to a cash ISA with that manager. The Icesave certificate shows £3,000 was subscribed to the Icesave ISA in 2008-09; so the aggregate subscription in the current tax year is £5,000, which exceeds the £3,600 cash ISA subscription limit.

Under current HM Revenue & Customs guidance the new manager would have to refuse to accept the transfer of the current year subscription in this scenario (see ISA Bulletins three and four). Instead, however, the investor and manager should simply agree to reduce the amount of Icesave current year subscriptions paid into the new ISA by £1,400, thus ensuring that the current year subscription limit is observed. The new manager would then report £3,600 as the subscription for 2008-09 on their annual return of information.

The new manager should also document the fact that the amount of current year subscription they accepted was less than that stated on the Icesave certificate.

Tken from http://www.hmrc.gov.uk/ISA/bulletin6-2008.htm

Not sure about interest earned but thinking logically it shouldn't be a factor as interest earned in an ISA is not counted as part of your annual ISA allowance.