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

DragonQ

Ed-1 wrote: »

Also with a Help to Buy ISA your ISA allowance becomes £3400 in the first year and £2400 a year thereafter as MSE say that you can't open another cash ISA in the same tax year which means you lose the remainder of the allowance:

Q. Can I open this as well as a normal ISA?

A. No. If you open one of these you can't have a normal cash ISA in the same year. And as the most you can put in this in a year is £2,400 (£3,400 in year one) - that's a lot less than the normal £15,240 allowance for the next tax year. Then again, the gain due to the government contribution is much higher.

http://www.moneysavingexpert.com/news/savings/2015/03/budget-2015-help-to-buy-isas-to-launch

Well losing most of the ISA allowance might be annoying in the long term but in the short term it doesn't really matter. The limit is £15,000 and ISA rates are crap. If the interest rate on the Help To Buy ISAs is near enough to the 2.4% (net) rate on current accounts then it's worth a punt for the big bonus if it's used for a mortgage later on (very likely in my case). Again though, it depends on the restrictions.

amictus

Ed-1 wrote: »

Also with a Help to Buy ISA your ISA allowance becomes £3400 in the first year and £2400 a year thereafter as MSE say that you can't open another cash ISA in the same tax year which means you lose the remainder of the allowance:

Q. Can I open this as well as a normal ISA?

A. No. If you open one of these you can't have a normal cash ISA in the same year. And as the most you can put in this in a year is £2,400 (£3,400 in year one) - that's a lot less than the normal £15,240 allowance for the next tax year. Then again, the gain due to the government contribution is much higher.

http://www.moneysavingexpert.com/news/savings/2015/03/budget-2015-help-to-buy-isas-to-launch

What would to stop you putting the remainder of your allowance into a shares ISA, then transferring this back to a cash ISA if you didn't want to invest it?

masonic

owains wrote: »

What would to stop you putting the remainder of your allowance into a shares ISA, then transferring this back to a cash ISA if you didn't want to invest it?

You'd have to wait until after the end of the tax year you paid into the S&S ISA, but could do this.

amictus

masonic wrote: »

You'd have to wait until after the end of the tax year you paid into the S&S ISA, but could do this.

Here's the only restriction around transfer of the current year's subscription given on the Government website:

https://www.gov.uk/individual-savings-accounts/transferring-your-isa

If you want to transfer money you’ve invested in an ISA this current year, you must transfer all of it.

There's nothing saying you must wait until the following year to transfer the funds. I don't see anything preventing you immediately transferring all funds deposited in the shares ISA. I have assume the funds deposited in a cash ISA and funds deposited in a shares ISA are considered separate... perhaps I'm wrong?

masonic

owains wrote: »

Here's the only restriction around transfer of the current year's subscription given on the Government website:

https://www.gov.uk/individual-savings-accounts/transferring-your-isa

There's nothing saying you must wait until the following year to transfer the funds. I don't see anything preventing you immediately transferring all funds deposited in the shares ISA.

You are only allowed to subscribe to one ISA of each type per tax year. If you subscribe to a cash ISA and a S&S ISA in the same tax year, you cannot transfer the current years subscriptions from the S&S ISA to a second cash ISA. This is because...

11.12a Where current year subscriptions are being transferred from a cash ISA to a stocks and shares ISA, or, from 1 July 2014, from a stocks and shares ISA to a cash ISA, the current year subscriptions
- are transferred in whole (including any related income), and
- are treated for all ISA purposes as if they had been made to the receiving ISA manager.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/375474/isa-guidance-notes.pdf

...so, in effect, it would be treated as if you never subscribed to the S&S ISA, and subscribed to two different cash ISAs within the same tax year.

jimjames

Ed-1 wrote: »

Also with a Help to Buy ISA your ISA allowance becomes £3400 in the first year and £2400 a year thereafter as MSE say that you can't open another cash ISA in the same tax year which means you lose the remainder of the allowance:

Q. Can I open this as well as a normal ISA?

A. No. If you open one of these you can't have a normal cash ISA in the same year. And as the most you can put in this in a year is £2,400 (£3,400 in year one) - that's a lot less than the normal £15,240 allowance for the next tax year. Then again, the gain due to the government contribution is much higher.

http://www.moneysavingexpert.com/news/savings/2015/03/budget-2015-help-to-buy-isas-to-launch

I've read the HMRC documents and this doesn't seem to be correct from MSE.

You can have a normal cash ISA and a HTB ISA but they have to be with the same provider.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/413899/Help_to_Buy_ISA_Guidance.pdf

amictus

masonic wrote: »

...so, in effect, it would be treated as if you never subscribed to the S&S ISA, and subscribed to two different cash ISAs within the same tax year.

Thanks masonic. I wasn't aware that that detail.

amictus

masonic wrote: »

You are only allowed to subscribe to one ISA of each type per tax year. If you subscribe to a cash ISA and a S&S ISA in the same tax year, you cannot transfer the current years subscriptions from the S&S ISA to a second cash ISA. This is because...


https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/375474/isa-guidance-notes.pdf

...so, in effect, it would be treated as if you never subscribed to the S&S ISA, and subscribed to two different cash ISAs within the same tax year.

Sorry to go off-topic... but you have now made me want to check my understanding of how the system works when transferring subscriptions from previous years. Specifically, I have transferred funds deposited in a cash ISA last tax year into a new cash ISA this tax year without adding any new funds. I was also intending to open another ISA account (with a different provider offering a better deal) and subscribe to that one before the end of this tax year. I had assumed this was OK as I thought only new funds were considered in the "one account per year" rule. I read through most of the document you provided and couldn't see anything that contradicted this. Am I right, do you think?

Ed-1

owains wrote: »

Sorry to go off-topic... but you have now made me want to check my understanding of how the system works when transferring subscriptions from previous years. Specifically, I have transferred funds deposited in a cash ISA last tax year into a new cash ISA this tax year without adding any new funds. I was also intending to open another ISA account (with a different provider offering a better deal) and subscribe to that one before the end of this tax year. I had assumed this was OK as I thought only new funds were considered in the "one account per year" rule. I read through most of the document you provided and couldn't see anything that contradicted this. Am I right, do you think?

Yes it's only current year subscriptions that you have to keep together in one ISA or a combination of one cash ISA/one S&S ISA. Transferring current year subscriptions between ISA types are treated as if the subscriptions were made to one ISA type in the first place (e.g. transferring current year S&S subscriptions to a cash ISA are then treated as cash ISA subscriptions). You can transfer previous years subscriptions separately.

amictus

jimjames wrote: »

I've read the HMRC documents and this doesn't seem to be correct from MSE.

You can have a normal cash ISA and a HTB ISA but they have to be with the same provider.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/413899/Help_to_Buy_ISA_Guidance.pdf

Paragraph 3.9 in this document:

As is currently the case, it will only be possible for a saver to subscribe to one cash ISA per year. It will therefore not be possible for an account holder to subscribe to a Help to Buy: ISA with one provider, and another cash ISA with a different provider. However, first time buyers who have more than £200 to save every month will also be able to benefit from the major changes to the taxation of savings announced in today’s Budget. From April 2016 individuals will benefit from a new Personal Savings Allowance of up to £1,000 for basic rate taxpayers, and up to £500 for higher rate taxpayers. Additional rate payers will continue to pay tax on all their savings income.

It doesn't actually say explicitly that it will be possible to subscribe to a Help to Buy ISA, and another cash ISA with the same provider. I didn't think it was possible to subscribe to two cash ISA accounts with the same provider at the moment (though I may well be wrong - see my previous posts!). The first sentence suggests the Help to Buy ISA won't be treated differently.