You CAN pay into cash ISA in 2015/16 and then use Help to Buy ISA later

jamesd

Martin recently made an unhelpful tweet "WARNING just revealed, if you want a Help 2 Buy ISA, don't open a cash ISA after 6 April or you lose your chance (this link to an article that repeats the error)".

For those who don't know the ISA rules well enough, you can do this. Unless specifically prohibited by new law there are at least four ways to contribute to both a Help To Buy and standard cash ISA in the same tax year, references are to Guidance Notes for ISA Managers:

1. Withdraw all of the money from the other ISA and close the account. You now no longer have a cash ISA and can contribute to a Help to Buy ISA or any other cash ISA under the cash ISA self-transfer rule that has permitted this for years. This allows redepositing the whole of the annual allowance, the money isn't counted twice. 12.32a

2. Pretend that the self-transfer rule doesn't exist. Pay in up to the annual limit minus the maximum Help to Buy limit and you can still withdraw all of the money, close the ISA account and then subscribe the maximum to the Help to Buy ISA.

3. Transfer the money from the existing cash ISA to a S&S ISA. The money originally subscribed to the cash ISA is reclassified as S&S ISA money and doesn't block opening a new cash ISA account. 11.12a

4. The one of each type rule is specified by ISA manager, not by ISA account. An ISA manager is free to let a person have an unlimited number of different current year cash ISA accounts if they want to. At the moment this flexibility is used by some providers to let people have fixed and variable rate ISAs. Count on providers wanting as much of your money as they can get and letting people have cash and Help to Buy ISAs at the same time. 3.1, but it also takes knowing that this is by manager, not by account.

So don't worry about this, just give the MSE team time to deal with my error report and get their article fixed and cross-checked with HMRC so they are satisfied that all of this is within the rules and doable.

Ed-1

jamesd wrote: »

Martin recently made an unhelpful tweet "WARNING just revealed, if you want a Help 2 Buy ISA, don't open a cash ISA after 6 April or you lose your chance (this link to an article that repeats the error)".

For those who don't know the ISA rules well enough, you can do this. Unless specifically prohibited by new law there are at least four ways to contribute to both a Help To Buy and standard cash ISA in the same tax year, references are to Guidance Notes for ISA Managers:

1. Withdraw all of the money from the other ISA and close the account. You now no longer have a cash ISA and can contribute to a Help to Buy ISA or any other cash ISA under the cash ISA self-transfer rule that has permitted this for years. This allows redepositing the whole of the annual allowance, the money isn't counted twice. 12.32a

2. Pretend that the self-transfer rule doesn't exist. Pay in up to the annual limit minus the maximum Help to Buy limit and you can still withdraw all of the money, close the ISA account and then subscribe the maximum to the Help to Buy ISA.

3. Transfer the money from the existing cash ISA to a S&S ISA. The money originally subscribed to the cash ISA is reclassified as S&S ISA money and doesn't block opening a new cash ISA account. 11.12a

4. The one of each type rule is specified by ISA manager, not by ISA account. An ISA manager is free to let a person have an unlimited number of different current year cash ISA accounts if they want to. At the moment this flexibility is used by some providers to let people have fixed and variable rate ISAs. Count on providers wanting as much of your money as they can get and letting people have cash and Help to Buy ISAs at the same time. 3.1, but it also takes knowing that this is by manager, not by account.

So don't worry about this, just give the MSE team time to deal with my error report and get their article fixed and cross-checked with HMRC so they are satisfied that all of this is within the rules and doable.

Also, regarding point 1, with the government's proposed new ISA flexibility, self-transfers look like being permitted unlimited times (rather than just once as at present).

jamesd

Right, I considered 5 but 4 was good enough and easy to reference.

MSE folks won't be the only people saying similar things because initial HMRC guidance on Budget day said this. Probably just takes people asking the right questions to say it's fine to do these things.

No hurry, plenty of time for places to get this all sorted out before 6 April.

TCA

Once they get it sorted (assuming it still goes ahead with the government of the day in the autumn), I'll be interested to see what interest rates the banks will offer for these accounts and what the exact definition of first-time buyer is. Can't help but think it won't be quite as straight-forward as it seems.

jamesd

The article now has a "Is there any way around this?" section that contains a well written version and nicely considered extension of this. Meanwhile MSE is also checking with the Treasury to try to get actual certainty.

jamesd

The article has been updated again so I assume that they received confirmation from the Treasury. It also now mentions that Nationwide plans to offer both standard and help to Buy cash ISAs under the same manager so you can have both with them. They probably won't be the only ones.