Cash ISA Rules

The_One_Who

I think I already know the answer, and will double-check with HMRC tomorrow, but wanted to know if my hunch was correct.

1. I have paid in to a Cash ISA this year (part-full), which is now closed for new deposits. I accept this is completely my own fault, I thought I had time to pay the whole amount in, but I had miscalculated.

I am of the understanding that the remaining allowance for the year is now lost to the wind, is this correct? If so, I'll just take the hit, like I say, was my own fault. But, is there any way around this?

2. I want to transfer the previous years' deposits to a new provider, and I assume I can do this fine, as long as the new provider allows transfers-in? Can I transfer the entire account amount out?

Ideally, I'd like to transfer-out the entire sum to the new provider, and add the remaining balance to the new pot, but I'd assume that goes against the rules of only subscribing to one Cash ISA per tax year.

Gordon_the_Moron

You can transfer the previous year's ISAs around as you like, whole or break it up, in theory if you had £100 you could transfer 1p into 10,000 different accounts (obviously you'd never practically do this - but you get the point you can split it up as and where you like)

The current year's part paid subscription into a closed ISA is a problem.

1. You could accept the hit

2. You could transfer elsewhere to an instant access and fill it up (you may have to pay an exit penalty and settle for a lower rate to do so)

3. You could ask the provider of the closed account if they will allow you to open another account with them for the remainder of this year's allowance. Treasury rules will allow you to hold the current year's allowance in two separate accounts as long as they are with the same institution, however a lot of banks and building societies won't allow this. You can at least ask.

Archi_Bald

Assuming your previous years' ISA(s) are not locked up for X years, the answer to your 2nd Q is definitely 'yes'.

Answer to your 1st Q depends on the T&Cs of your ISA - - which ISA is it? You might be able to transfer it as well, though it sounds it is a fixed-term one with a penalty for early withdrawal/transfer.

The_One_Who

The current year's part paid subscription into a closed ISA is a problem.

1. You could accept the hit

2. You could transfer elsewhere to an instant access and fill it up (you may have to pay an exit penalty and settle for a lower rate to do so)

3. You could ask the provider of the closed account if they will allow you to open another account with them for the remainder of this year's allowance. Treasury rules will allow you to hold the current year's allowance in two separate accounts as long as they are with the same institution, however a lot of banks and building societies won't allow this. You can at least ask.

Answer to your 1st Q depends on the T&Cs of your ISA - - which ISA is it? You might be able to transfer it as well, though it sounds it is a fixed-term one with a penalty for early withdrawal/transfer.

It's a one-year fixed rate ISA. I'm sure I read that HMRC will at their discretion allow you to change providers and top-up, but it's not guaranteed, which is why I am planning to call them tomorrow to double-check.

If not, I will ask about opening another one with the same provider. Didn't think that was allowed. I'll read through the T&Cs, and probably contact them as well. Thanks.

rb10

Gordon_the_Moron wrote: »

3. You could ask the provider of the closed account if they will allow you to open another account with them for the remainder of this year's allowance. Treasury rules will allow you to hold the current year's allowance in two separate accounts as long as they are with the same institution, however a lot of banks and building societies won't allow this. You can at least ask.

As far as I know, Nationwide is the only major provider to permit this.

There are also a handful of smaller building societies that will allow you to split your allowance across different accounts.

thenudeone

Newcastle BS allow an ISA allowance to be split
https://www.newcastle.co.uk/maximisa

Closing the account and doing a self-transfer is permissable under HMRC's guidance, but you would be no better off than doing a formal transfer, because there would still be a penalty for closing / transfering before the fixed rate period was up.

The_One_Who

Sorry to bump.

I contacted HMRC and the "technician" didn't seem to have a clue. After re-reading the same sentence several times she came to the conclusion that it was allowed, as long as a transfer takes place - as there would be only one cash ISA open (with the original one closing after transfer).

Does anyone have anything contrary to that?

zerog

The_One_Who wrote: »

Sorry to bump.

I contacted HMRC and the "technician" didn't seem to have a clue. After re-reading the same sentence several times she came to the conclusion that it was allowed, as long as a transfer takes place - as there would be only one cash ISA open (with the original one closing after transfer).

Does anyone have anything contrary to that?

You can transfer the current year's ISA, but you can't split it.

The problem is that the bank may charge you for closing early.

thenudeone

The_One_Who wrote: »

I contacted HMRC and the "technician" didn't seem to have a clue. After re-reading the same sentence several times she came to the conclusion that it was allowed, as long as a transfer takes place - as there would be only one cash ISA open (with the original one closing after transfer).

Does anyone have anything contrary to that?

The technician was partly right.

What he didn't say ws that it is permissable under HMRC's guidance to withdraw all of the current year's contributions from an ISA; then open another one and deposit the full allowance there.
This is a concession an only allowable once a year. Most people don't know about it (even HMRC!)
See section 12.32 here:
http://www.hmrc.gov.uk/isa/isa-guidance-notes.pdf

But in the stated situation, you still have to decide whether paying the penalty for early withdrawal on the existing account is worth it.