MSE News: Budget 2015: ISAs to become fully flexible with withdrawals allowed

jimjames

I very much doubt it

Ed-1

jimjames wrote: »

I very much doubt it

jamesd wrote: »

Please provide your source for this claim.

It seems like you could be right jamesd. I interpreted it (as many others and how Martin explained it) as only relating to ISA subscriptions (i.e. you can put back in ISA subscriptions for the same tax year without it re-contributing against the allowance). But BBC has apparently had it confirmed from HMRC:

HM Revenue & Customs confirmed that this new flexibility meant that someone could move out their entire Isa savings, accumulated over many years, and then reinstate them within the current tax year to resume their tax-free status. http://www.bbc.co.uk/news/business-31942922

So if this is correct ISA 'self-transfers' would be possible too and ISAs would not have to allow transfers in to allow you to re-instate your ISA funds.

It also removes the issue of keeping your built-up ISA in an ISA for future tax-free status and suffering low rates as a result as you can withdraw it, put it in high interest accounts (for which you now have a £1000 tax free savings allowance as well) and then redeposit it in an ISA at the very end of the tax year and then take it out again the next day at the start of the new tax year and repeat...

Quite a major shake-up of savings if this is the case.

masonic

Sounds like this is going to be a nightmare for HMRC to police.

dale_cotterill

jimjames wrote: »

Flexibility only works for current years subscription. Probably the reason it doesn't work for S&S ISAs is that the value would fluctuate daily so amount taken out might be more than the allowance.

I have the Q&A for Banks & Building Societies in front of me and it implies that you can several years worth of ISA subscriptions provided that is replaced in the same tax year.

masonic wrote: »

Sounds like this is going to be a nightmare for HMRC to police.

It's going to be a nightmare for the providers to monitor.

Castle

From the Government 's own budget report, (and I'm still none the wiser!)

"1.225 The government will allow ISA savers to withdraw and replace money from their cash ISA without counting towards their annual ISA subscription limit for that year, as long as the repayment is made in the same tax year as the withdrawal. This will enable savers to access their ISA savings more flexibly without losing the benefits they have built up. These changes will be introduced in autumn 2015, following consultation with ISA providers. "

Could be the end of fixed term ISA's; what about all those who have just taken out 4-5 year ISA's.

jamesd

Isherwood wrote: »

IDoes this mean that I would be able to withdraw say £50k from it on 6 April 2016 and then be able to put the £50k back as long as I did it before 6 April 2017?

We don't know. There is to be a consultation. When there is a consultation please give your feedback about the desirability of the limits being large so that banks can't just continue to pay less interest on ISA accounts and keep the income tax saving that was intended for us consumers.

Ed-1's post with the link to the BBC story saying "HM Revenue & Customs confirmed that this new flexibility meant that someone could move out their entire Isa savings, accumulated over many years, and then reinstate them within the current tax year to resume their tax-free status" is promising but still, we don't know the outcome of the consultation yet.

masonic wrote: »

Sounds like this is going to be a nightmare for HMRC to police.

I don't see why. The intra-year exceeding or not of the annual allowance is tracked by the banks, not HMRC. The restriction of the money having to be returned in the same tax year means that the payments don't necessarily have to be shown on their annual report to HMRC at all. Though I presume that there would be a new category.

However, that's me assuming that the money has to be paid back into the same bank. That's just speculation. It could be any bank. If so, that would involve more work for HMRC alright.

jamesd

Castle wrote: »

Could be the end of fixed term ISA's; what about all those who have just taken out 4-5 year ISA's.

"4.30 ISA managers’ ISA terms and conditions must specify in writing that ... either
(where the manager allows partial withdrawals)
on the instructions of the investor and within the time stipulated by the investor, all or part of the investments held in the ISA and proceeds arising from those investments shall be transferred or paid to the investor

or (where a manager does not allow partial withdrawals)
on the instructions of the investor and within the time stipulated by the investor, all the investments held in the ISA and proceeds arising from those investments shall be transferred or paid to the investor

(Managers may place a minimum period on the time stipulated by the investor for transfer. This period, which should represent whatever reasonable period the manager requires for practical implementation of withdrawal requests, must not exceed 30 days."

Guidance Notes for ISA Managers, 07/2014, page 36

A manager is allowed to have an interest rate penalty for withdrawing early but that's all. Expect to see lots of withdrawing from term ISAs when interest rates have increased significantly. They are an interest rate option for the depositor, not a commitment by the depositor.

colsten

jamesd wrote: »

I don't see why. The intra-year exceeding or not of the annual allowance is tracked by the banks, not HMRC.

This is not true, not least since banks are not able to do this because people can choose to deposit into both, cash and S&S ISAs. This has always been the case, and it has always been HMRC that policed the allowance limit.

jamesd

jamesd wrote: »

Providers are already required to track how much of our annual allowance you have used with them and prevent you from exceeding it with them. I agree that it's still possible to go over the limit with more than one account, something that HMRC catches after the providers file their annual reports with HMRC. I'm sure that HMRC will want providers to continue to enforce the limit as they do now, to the extent that they can.

jamesd wrote: »

I don't see why. The intra-year exceeding or not of the annual allowance is tracked by the banks, not HMRC. The restriction of the money having to be returned in the same tax year means that the payments don't necessarily have to be shown on their annual report to HMRC at all.

colsten wrote: »

This is not true, not least since banks are not able to do this because people can choose to deposit into both, cash and S&S ISAs. This has always been the case, and it has always been HMRC that policed the allowance limit.

Guidance Notes for ISA Managers, 07/24 page 34:

"Managers’ systems must ensure that
o up until 1 July 2014, no more than the cash ISA savings limit can be subscribed to a cash ISA in a tax year and that no more than the overall limit can be subscribed to a stocks and shares ISA in a tax year
o from 1 July 2014 no more than the overall limit can be invested to either a cash or a stocks and shares ISA
o investors do not subscribe to a disallowed combination of ISAs with them (see paragraph 3.14), and
o where the investor subscribes to both a cash ISA and a stocks and shares ISA with them, the amount subscribed does not exceed the overall subscription limit"

There were similar requirements in previous versions, just about all of which I've read. And as you can see from me quoting what I wrote just a few posts earlier, I'm well aware of the limitations of this mandatory checking at each individual place.

colsten

Stop being silly. No ISA provider could ever ensure people are not using more than their allowance. The only thing they can do, and do do, is to ensure that nobody deposits more than their allowance with them.

I could have deposited £1,000 with 20 ISA providers this year and all of them would tell me I have £14,000 left to deposit. They would all let me deposit another £14,000 before the tax year is out.

Once they have submitted their annual reports to the HMRC in June, the HMRC would then come down like a ton of brick on me, not on any of the providers. They will just tell most of the providers that I have been naughty and that they should return the money to me, without any interest. HMRC might also give me a very stern warning, or perhaps stronger, about tax fraud.