paying the increased ISA allowance into a Halifax fixed rate ISA

temba

I suggested that my parents paid their ISA allowance into their low-earning Halifax ISA then transfer it to a fixed rate. I then sat with them whilst they did this. I felt pretty good that they'll be making more interest than they would have done otherwise...

but...

I was told at the time that they needed to pay in the £3600 all in one go, because once it was fixed they couldn't pay into it again. This we did and now because of the budget they will get an increased allowance for this year. So what happens here? Can they pay more money into the Halifax ISA? I know I should just ring Halifax and ask, but they are closed and you lot know everything :T

Thanks,
T

Mikeyorks

They can't do it prior 6th October ..... so there is no rush? And it's unlikely Halifax will know at this point.

As the rules stand at the moment your parents aren't allowed to pay into a 2nd ISA during the year .... so HMRC are going to have to make some transient changes to allow that in cases such as this.

Some providers may allow you (idc) to put additional funds into Fixed Rate ISAs which currently forbid it. But where the interest rate on offer would be considered punitive (to the provider) in the current climate ..... expect to have to add the extra into a different product.

temba

Yes I know there's no rush - I would like an answer before my parents spot the flaw in my "financial" advice ....! Thanks for your answer.
T

Mikeyorks

There was no 'flaw' in it ..... for most people a fixed rate ISA (so long as it was only for a year ... with rates as they are) has made the most sense for the past 12 months. All mine are fixed rate for the past 5 years.

The Treasury / HMRC have to come up with an answer prior 6th October .... as a lot of people are in the same boat. And I doubt very much that answer will revolve around only being able to pay into an existing 09-10 ISA ..... as it simply won't work. So they will have to relax the rule that you can only contribute to one Cash ISA in the year. But no one will give you a definitive on that at the moment.

This Budget note on the HMRC site is probably as good as it gets at the moment? :
http://www.hmrc.gov.uk/budget2009/bn51.pdf

Milarky

The rule (as I understand it) is - and has laways been - not 'one account per provider per year' - it is 'one provider per year'. Thus if you opened an ISA with £3600 already with (say) Halifax, you can open a second ISA with them (because they are your provider for 2009/10) and they are permitted to receive all your subscriptions for this year.

temba

Brilliant - that makes complete sense.
Thank you
T

Mikeyorks

Milarky wrote: »

The rule (as I understand it) is - and has laways been - not 'one account per provider per year' - it is 'one provider per year'. Thus if you opened an ISA with £3600 already with (say) Halifax, you can open a second ISA with them (because they are your provider for 2009/10) and they are permitted to receive all your subscriptions for this year.

Sorry Milarky .... but I'll have to disagree with that. You cannot, for example, open a fixed rate and a variable rate ISA with Halifax and put £1800 of new money into each?

The 'provider' (except from the obvious definition of 'one nnn ISA') doesn't enter the equation under the HMRC guidance:

3.14 In each tax year, ISA investors may subscribe to

• one cash ISA and

• one stocks and shares ISA
They may not subscribe to two (or more) cash ISAs, or two (or more) stocks and shares ISAs in the same tax year. Where the investor makes a transfer of current year subscriptions from a cash ISA to a stocks and shares ISA, the subscriptions to the cash ISA are treated as if they
were made to the stocks and shares ISA so the investor can subscribe to a cash ISA following the transfer – subject to the overall subscription limits

...... so HMRC are going, at least, to have to resolve the issues around where current year deposits are in (now closed) fixed rate products

opinions4u

Milarky wrote: »

The rule (as I understand it) is - and has laways been - not 'one account per provider per year' - it is 'one provider per year'. Thus if you opened an ISA with £3600 already with (say) Halifax, you can open a second ISA with them (because they are your provider for 2009/10) and they are permitted to receive all your subscriptions for this year.

I am 99% sure that on this occasion you are wrong. Sorry.

Providers basically have 5 months to come up with solutions and have them comply with HMRC.

Ultimately, it will cost most providers several hundred thousand pounds to upgrate their systems to allow the additional £1500 while restricting it to over 50s.

The value to the over 50s? £1,500 x 3% = £45 x tax at 20% = £9 x half a year = £4.50.

The stupid chancellor has clobbered the banking system for a bill running in to £millions to dish out an age discriminating pre-election bribe of less than a fiver to a few hundred thousand oldies.

Ill thought out short termism that actually damages the economy because:

1) Forcing the banks to spend on capital projects like this reduces their lending ability.
2) It encourages saving which reduces spending which is totally at odds with current policy.

The man has lost it.

Mikeyorks

opinions4u wrote: »

The man has lost it.

Indeed - there are eerie echoes of the 10% tax rate abolition from last year? Straight out of the same circus.

It doesn't take an Einstein to realise that when you create an exception to the norm ... then those exceptions cost money. And particularly when you're meddling with the macro systems of HMRC + all the financial Institutions.

Personally I think they'll just go for a 'light touch' at the Institutional end in view of the transient change. But the cost + resentment of the under 50's .... is still unlikely to justify the rather slender benefits.

rb10

It should create a few jobs though, maybe he's trying to reduce unemployment. Pick two organisations that clearly have money to throw away (hmmm, let's think ... HMRC & banks clearly come into that category, neither have better things to spend it on), and legislate so both need more staff. All part of the wider - and of course well thought out - plan to get businesses spending money again.

Or maybe not.

david78

In practice its as Milark's says - one cash ISA manager (or provider) per year.

The HMRC guidance is just that, guidance. Its not the legislation.

You can open and subscribe to multiple cash ISA "accounts" with one bank or financial institution provided (a) they are an authorised ISA manager, and (b) their systems allow them to check that the contributions made to multiple accounts do not exceed the annual limit.

The authorised ISA managers are here:

http://www.hmrc.gov.uk/ISA/isa-managers.pdf


Some cash ISA providers such as Halifax choose to simplify things by only allowing one account per year, but they only do this because it is simpler for them to manage. I expect them to relax their rules this year to allow top-ups into other cash ISA accounts .