Cash ISA — Limit Increase 2009/10

joegib

As most people with an interest in ISAs know the cash limit for over-50s is increased by £1500 to £5100 with effect from 6/10/2009. There is a rule which prohibits a depositor from "subscribing" to more than one cash ISA per year. So, I'm left wondering what the position is of a depositor whose initial ISA this year has closed for further subscriptions.

I'm thinking of the Newcastle BS 5% ISA that closed earlier this year*. Presumably, over-50 depositors who want to take advantage of the increased limit won't be able to make an additional deposit there. Yet the "one-ISA" rule won't permit them to open another ISA elsewhere. Is it likely that this rule will be relaxed in these special circumstances?

(* I've mentioned the Newcastle BS but I suppose the same principle applies to any institution that closes an ISA for further subscription before 6/10/09)

financial_illiterate

The simple answer is we don't know yet.

I'd have thought it quite likely that the existing providers will allow the isa's be reopened for a short period to allow for the additional deposits, but whether that will be left up to the institutions or obliged on them I wouldn't like to say.

Paul_Herring

So, I'm left wondering what the position is of a depositor whose initial ISA this year has closed for further subscriptions.

Likely you won't be able to add to it, unless the institution itself allows you to.

This would be akin to the rule whereby HMRC allows you to transfer previous years' subscriptions between institutions, but individual institutions may override this and say you cannot transfer into their ISA.

apt

In the case of Newcastle BS if they do not allow the over 50s to top up their 5% ISAs they will let you pay £1,500 into another of their cash ISAs.

jimbow25

apt wrote: »

In the case of Newcastle BS if they do not allow the over 50s to top up their 5% ISAs they will let you pay £1,500 into another of their cash ISAs.

By "they will allow" do you mean HMRC or Newcastle BS?

I have not seen any suggestion of a change in the "you can only subscribe to one cash ISA in each tax year" rule. Even if Newcastle BS would allow it I'm not sure paying into 2 different accounts at the same institution is within the rules.

I would assume people in the situation you describe will not be able to use the increased allowance for this tax year, unless it is confirmed otherwise.

financial_illiterate

jimbow25 wrote: »

By "they will allow" do you mean HMRC or Newcastle BS?

I have not seen any suggestion of a change in the "you can only subscribe to one cash ISA in each tax year" rule. Even if Newcastle BS would allow it I'm not sure paying into 2 different accounts at the same institution is within the rules.

I'm by no means an expert, but I thought that was already allowed.

KingL

jimbow25 wrote: »

I have not seen any suggestion of a change in the "you can only subscribe to one cash ISA in each tax year" rule. Even if Newcastle BS would allow it I'm not sure paying into 2 different accounts at the same institution is within the rules.

Some of the IFAs here have said on other threads that it is (and always has been) within the rules - two new cash ISAs in the same year with the same ISA manager can be regarded by HMRC as a single cash ISA.

Obviously the allowance applies across both.

ISA managers aren't obliged to provide this service.

rb10

It depends on the rules of the individual ISA provider.

Halifax, for example, will allow those people who are eligible for the higher limit to make one additional deposit into fixed ISAs (which wouldn't normally allow additional deposits) between October 2009 and the end of the tax year. Other providers may choose to have this same rule, or strictly enforce their T&Cs.

Paul_Herring

jimbow25 wrote: »

By "they will allow" do you mean HMRC or Newcastle BS?

I have not seen any suggestion of a change in the "you can only subscribe to one cash ISA in each tax year" rule. Even if Newcastle BS would allow it I'm not sure paying into 2 different accounts at the same institution is within the rules.

From my reading, no change is required - the current rules allow it.

An 'open ISA' is money held with one institution in this tax year.

How that institution holds that one ISA (in one account, in two) is a matter for that institution - in much the same way that most institutions hold your 'open ISA' in the same numbered account with all your 'closed ISA's' (your previous years contributions) when in fact (in the eyes of HMRC) they are different accounts.

Of course it's up to individual institutions whether they allow this themselves (see my comment on transfers above.)

glider3560

jimbow25 wrote: »

By "they will allow" do you mean HMRC or Newcastle BS?

I have not seen any suggestion of a change in the "you can only subscribe to one cash ISA in each tax year" rule. Even if Newcastle BS would allow it I'm not sure paying into 2 different accounts at the same institution is within the rules.

I would assume people in the situation you describe will not be able to use the increased allowance for this tax year, unless it is confirmed otherwise.

Nationwide allow you to open and fund as many of their ISA products as you like within one tax year as long as your total subscription isn't more than the limit (not sure how they manage this). I assume other ISA providers could get round the rules in a similar way?

RayWolfe

It's not getting round the rules, they are the rules. As Paul said, not all institutions will allow it under their own procedures.