HMRC Letter - ISAs Oversaved?

mrsupremacy

Very confused about my ISA situation.

I am with Natwest and I have an E-ISA and a Cash ISA. In addition, to a standard current account.

Opened both in different tax years.

I have had around £18,000 + in my e-isa and a few hundred I think in my cash isa. At the moment, the cash isa as 12 quid and the e-isa has under 8 grand due to a transaction last month.

Now, today, I have received a letter from HMRC saying that's I've saved too much by £8873 in two cash ISAs.

Okay, If I've done something wrong then I will rectify the situation. It does say on the back of the letter that if this happened again in the futurethey may ask my ISA manager to take money out for tax - fair enough. It appears to be a warning letter not to do it again. Again, fair enough.

What I want to know though, is what exactly I am doing wrong?

I was under the impression that I could put around 5 grand each year into the account. Can I not have up to 18 grand tax free in the ISA accounts. Or am I not allowed to do that with E-ISA and Cash-ISA?

Would I be better off just having the E-Isa (better interest rate and closing the cash isa)

Any help, would be great. Thanks.

Lokolo

What have you deposited over the last year? (April 6th 2012 - April 5th 2013)

Last years deposit allowance was £5640, this was the amount you were allowed to deposit in an ISA.

mrsupremacy

Just gone though my records again for clarification. I had £14,000 in my e-isa and just over £3,000 in my cash isa at the end of march/april last year.

However, I did transfer £3,000 from my cash isa to the e-isa, which then resulted in pretty much the £12 quid I have it it now.

So, only £3,000 has gone in to my E-ISA then since April 10, 2012.

I've left the cash isa alone pretty much hence the £12 amount in there.

Is it okay having an E-ISA and a Cash ISA? Just all seems a bit strange as I thought I have done everything fine.

Lokolo

So all you've done the whole year is move £3,000 from one ISA to another ISA? I assume you didn't use an ISA transfer form.

You didn't deposit any other money?

innovate

mrsupremacy wrote: »

So, only £3,000 has gone in to my E-ISA then since April 10, 2012.

What went into which ISA how between April 6 2012 and April 5 2013?

mrsupremacy

Lokolo wrote: »

So all you've done the whole year is move £3,000 from one ISA to another ISA? I assume you didn't use an ISA transfer form.

You didn't deposit any other money?

All done online.

Lookin at transactions, obviously interest per month, but I'd say an additional £800 has gone into the E-ISA from my normal current account. Yes around that plus the 3 grand I mentioned earlier.

mrsupremacy

innovate wrote: »

What went into which ISA how between April 6 2012 and April 5 2013?

E-ISA:

£4,200 has been transfered in. (inc £3000 from the cash isa). Again, this has had £12,500 taken out in March for a transaction, so just a few grand in now.

Cash ISA:
£56 paid in. But, obviously, money has gone out of this to current account as it now stands at 12 quid

innovate

You need to provide the exact dates on which what amounts went into which account, and by what method.

It is irrelevant what came out, and what the current balance is. Only deposits and transfers-in are relevant for the problem in hand.

I am beginning to think the issue is that you made deposits of new money into TWO ISAs in the same financial year. This is not allowed under ISA rules.

dzug1

It matters not one jot how much is IN either of your ISAs

What matters is how much you PUT IN in a single tax year

It's possible that Natwest treat your two ISAs as a single account.

mrsupremacy

innovate wrote: »

You need to provide the exact dates on which what amounts went into which account, and by what method.

It is irrelevant what came out, and what the current balance is. Only deposits and transfers are relevant for the problem in hand.

Transfer into ISA accounts.

Between 6 April 2012 and 5th Apr 2013
E-ISA Account.
10/02/12: £3000 (From cash isa)
7/06/12: £75.53
21 Aug: £100
03/12/12: £25
04/02/13: £600
01/03/13: £50
07/03/13: £350

Cash ISA
3/12/12: £56

innovate

OK, assuming that most of the payments were deposits of new money, the problem is as I suspected. You paid new money into two ISAs in the same tax year. This is not allowed, and that's why the HMRC wrote to you with a warning not to do it again.

It's a rather unusual thing to do, wanting to pay into two ISAs in the same financial year. Can you explain why you felt it was the right thing to do? What are/were the interest rates on the two ISAs?