Rules on closing one ISA and putting cash in another in same tax year!

Seapoint

Can anyone help?

I had an existing cash ISA with Natwest (measly 0.75%) and paid £500 into it this tax year in late April. In June I withdrew most of the money leaving a balance of £40. Following some research I realised Nationwide had a much better interest rate (1.5%) & opened an ISA with them thinking I would still have an allowance of £14,500 I could deposit here. I went to Natwest , explained the situation and closed my ISA with them (wihtdrawing remaining £40).

BUT - I am now being told by Nationwide that because I had an existing ISA and have deposited this tax year with Natwest that I am not allowed to deposit any money in my Nationwide ISA. I am being told to open another ISA with Natwest (initial ISA Manager 2014/15), deposit my £14,500 with them and only then I can transfer the funds to Nationwide.

Is this the best workaround? Is this correct? Natwest are not happy to do this due to the circumstances and are due to call me on Monday with advice. Any insight before then would help me in case I am blocked by both parties.

Many thanks.

jimjames

Why would you even bother with an ISA for £500 when you can get 5% on that money with TSB current accounts?

If you really want to use an ISA then transfer is the way to work it and you can then put new money in afterwards.

thenudeone

Using multiple Current accounts is not for everybody.

If you are intent on using ISAs, there is a solution. Under the HMRC rules, if you COMPLETELY CLOSE your Natwest ISA, you can open a brand new ISA with another provide and deposit up to the the full allowance. You can only do this once per tax year.

It is explained in section 12.32 here: http://www.hmrc.gov.uk/isa/isa-guidance-notes.pdf

Is is probably intended for people who accidentally do a self-transfer this way, but there is nothing to stop anyone doing it deliberately, and you will need to lie to your new provider when they ask: Have you subscribed to an ISA this tax year?

colsten

thenudeone wrote: »

you will need to lie to your new provider when they ask: Have you subscribed to an ISA this tax year?

super plan, lying to a bank. And all that to get a sub-inflation interest rate.

I'll go away and see whether I can get my head stop shaking.

Seapoint

Thanks all.. I think this helps..

I only put in £500 at the time as this is all I had.. I clearly don't understand ISAs looking at everyones comments. I now have the full 14,500 allowance balance to put in so thought ISA best option.. maybe not. WIll wait to see what Natwest says..

I cannot lie to Nationwide as already told them of situation in a bank meeting yesterday )

Thanks to all.. I am a first time poster so appreciate your thoughts and time..

Archi_Bald

It's may be worth taking a step back and ask

1. when do you plan to spend the £14,500?
2. how much are you intending to put into an ISA in 2015-16?
3. what is the size of your emergency budget?
4. what is the interest rate / title of your intended ISA with NatWest?
5. have you maxed your work pension contributions for the year?
6. what tax band are you in

thenudeone

colsten wrote: »

super plan, lying to a bank. And all that to get a sub-inflation interest rate.

The banks as their question to make sure that they and you are operating with in the rules.

But if you open an account this way, it is all within the HMRC rules (even though if you answer the question honestly, the bank will just say - "no it isn't", which isn't true)

99.99% of the time the bank's question will give the same answer as the real question which is - are you opening this account within HMRC rules?

Would you rather that the banks ask a more complex and much longer question to see whether the once-a-year self-transfer exemption (explained in section 12.32 of the HMRC guidance) is valid?