Exceeding your ISA allowance.

edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
5 replies 1.7K views
ChjakaChjaka Forumite
72 Posts
edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
I was just reading this article regarding loopholes in ISA regulations and came across the following statement;

"...HMRC collects comprehensive annual information from ISA providers, which enables us to identify all individuals who breach the ISA rules. If savers deposit or invest more than their individual limit ... then HMRC will write a 'notice of discovery' to their Isa provider, pull the extra funds out of their Isa, tax them and claw back any unwarranted interest."

I was curious to see whether HMRC are as meticulous as they claim to be in identifying "all individuals" who oversubscribe to ISA's. Have you ever accidentally, or purposefully, oversubscribed to an ISA and did HMRC "claw back" the unwarranted interest or did it just go unnoticed?

(Proviso: This question is asked purely out of curiosity, it infers absolutely no intention to purposefully exceed any ISA allowances or to provide any encouragement for others to do so).

Replies

  • Stuey1980Stuey1980 Forumite
    43 Posts
    I went slightly over the limit once as keeping track of what has gone in can be tricky if you have taken some out here and there. The ISA provider simply returned the excess to the account where the cash came from almost immediately. No interest was earned on it.
  • edited 25 June 2013 at 4:24PM
    innovateinnovate
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    edited 25 June 2013 at 4:24PM
    Chjaka wrote: »

    I was curious to see whether HMRC are as meticulous as they claim to be in identifying "all individuals" who oversubscribe

    Yep, dead easy for the HMRC to do since they get a report from each ISA provider for each NI number. Not hard to fish out the oversubscribers, that's why they catch up with all of the ones that haven't yet been dealt with by an ISA provider. Individual ISA providers wouldn't normally know if you subscribed with another provider, thus the HMRC will control the subscriptions overall.
  • helptoyouhelptoyou Forumite
    100 Posts
    An article from 2009 ?? Maybe you should read current instructions !!!

    http://www.hmrc.gov.uk/isa/faqs.htm
  • jimjamesjimjames Forumite
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    Part of the Furniture 10,000 Posts Photogenic Name Dropper
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    As you can invest up to £11520 in a S&S ISA and the balance in a cash ISA it is impossible for the providers to know your available allowance during the year. In theory you could open a S&S ISA with the full amount and also a cash ISA to the full limit putting you 50% over your allowance.

    HMRC will check the return at the end of the year and cancel one or both of them so is it worth the risk.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • westy22westy22 Forumite
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    I inadvertently went over my ISA allowance a couple of years ago - HMRC did spot it and wrote to me the following year but only with a 'don't do it again' letter and no reduction to the sums invested. I think I was about £250 over the limit.

    I've been extra careful since then!
    Old dog but always delighted to learn new tricks!
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