Natwest Fixed rate Isa error

Chalky77

Apologies if you have already seen this message on the cash isa transfer thread. Just realised that I should really have set up a brand new thread for my queries:

Hi,
Could do with a bit of advice please.
I was happily paying in to a Natwest e-isa for a couple of years, but then a few months ago when I was on the Natwest website I noticed an ad for their fixed rate isa's. When I saw that the rates were much better I decided to apply for one so I could put this years allowance in to it. All went through fine, and the transfer of the previous balance went over ok. What I hadn't realised was that there was a very small window of opportunity to actually make a new deposit in to the Isa. I've just gone to make a deposit and found that I have run out of time. To compound matters, on the application form there is a box asking to make a deposit on opening the Isa. I must have ticked it and put £100. So now I can't put the remainder of this years allowance (£5240) in to that account, and I have been advised by Natwest then I can't apply for a new e-isa because I have made a deposit in this year of £100!

So, would it seem that I have wasted my chance to use my 11/12 tax free isa allowance? Would it flag up anywhere if I set up a new Isa with a different provider? I can't imagine that my £100 would be noticed, but then I don't know? Could anyone advise please. Many thanks.

System

Have you spoken to NatWest to see if they would allow you to deposit a further £5240 into the fixed rate account, they may waive the deposit deadline if you explain what happened.

Otherwise, you could open a new Cash ISA without making an initial deposit. Then complete an ISA Transfer form from the new ISA provider (Can be NatWest if you wish) to transfer the £100 from the fixed rate ISA which will close that fixed rate account.

Once the transfer has completed, then you can deposit the remaining £5240 into your new ISA account.

But...check what penalties there are for closing the fixed rate account.

Chalky77

Thanks for your feedback.

I have spoken to Natwest, and they haven't given any indication that they would allow a deposit after the deadline.

Its a two year fixed with a 90 day interest penalty if I transferred it out, and as there is over 20k in there I think the penalty will outweigh the benefit of interest gained in a new ISA.

Could I not just open up a new ISA elsewhere and hope that the £100 that i've already paid doesn't get picked up? I don't who regulates this sort of thing and how stringent it is?

david78

Its regulated by HMRC but they can be fairly leniant for "first offenders".

Have a read of this.

http://www.thisismoney.co.uk/money/saving/article-1715710/Exposed-Taxmans-Isa-flaw-and-loophole.html

In short you can put the remaining £5,240 in another cash isa with someone else and will probably get away with no more than a friendly letter from HMRC (after 5 April 2012) explaining the rules and asking you not to do it again. If you're worried, then do it anyway and ring HMRC's Helpline and tell them what you have done (they will say, its ok). Whatever you do, don't exceed the £5,340 overall.

System

Chalky77 wrote: »

Thanks for your feedback.

I have spoken to Natwest, and they haven't given any indication that they would allow a deposit after the deadline.

Its a two year fixed with a 90 day interest penalty if I transferred it out, and as there is over 20k in there I think the penalty will outweigh the benefit of interest gained in a new ISA.

Could I not just open up a new ISA elsewhere and hope that the £100 that i've already paid doesn't get picked up? I don't who regulates this sort of thing and how stringent it is?

If you do not ask the specific question, then do not expect bank staff to think about suggesting the posibility of ignoring the deposit deadline, if you do not ask you do not get Also, check the T&Cs for your particular fixed rate account, what did it say was the minimum deposit ? (The current NatWest fixed rate ISA has a minimum deposit of £1,000) if you have not subscribed the minimum (ignoring your transfer in) you could point this out to the bank as a mitigating factor.

I would ignore any advice you get to break the ISA tax rules, it is not worth it for the few quid you would earn on the £5240.
I agree that a transfer is out of the question, because of the 90 day loss of interest, why not simply deposit the £5240 in an ordinary savings account and pay the tax due, then get back on track next April with the new allowance.

Funkyfreddy

Chalky77 wrote: »

Thanks for your feedback.

I have spoken to Natwest, and they haven't given any indication that they would allow a deposit after the deadline.
...

Check with a Natwest if they will allow you to open a second ISA with them for your remainig 2011/12 allowance from their currently available range - a "normal" flexable ISA for example.

I'll be corrected by those that know for sure on here if wrong but if I recall your Cash ISA allowance is the amount deposited with your ISA Manager (ie NatWest in this instance) rather than a specific product.

FF

System

Funkyfreddy wrote: »

...

I'll be corrected by those that know for sure on here if wrong but if I recall your Cash ISA allowance is the amount deposited with your ISA Manager (ie NatWest in this instance) rather than a specific product.

FF

That is not 100% accurate.

The regulations do not say the allowance is associated with the ISA manager, the regs limit the new money subscription allowance to one ISA wrapper per year.

So, if the NatWest ISA system allows more than one ISA account / product to be reported under one ISA wrapper, then that would be okay under the regs.

Funkyfreddy

BAA1 wrote: »

That is not 100% accurate.

The regulations do not say the allowance is associated with the ISA manager, the regs limit the new money subscription allowance to one ISA wrapper per year.

So, if the NatWest ISA system allows more than one ISA account / product to be reported under one ISA wrapper, then that would be okay under the regs.

Aha, OK thanks for the clarification.

So its up to the ISA Manager to decide what products can come under a ISA Wrapper. I would have thought (hoped ?) that Cash ISA's from one ISA manager would be classed as within the same ISA Wrapper though ?

Doesn't sound like thats how it works though !

Regards
FF

thenudeone

Funkyfreddy wrote: »

Aha, OK thanks for the clarification.

So its up to the ISA Manager to decide what products can come under a ISA Wrapper.

Some ISA providers allow customers to split their ISA allowance between different types of Cash ISA account, eg: fixed rate, notice, instant access, etc. but they don't have to.

eg: http://www.newcastle.co.uk/maximisa/main