Tax Free Savings Guide

eskbanker

PowerSavingMode said:
Still working my head around it all, but that's very useful to know going forward. I am keeping several possible scenarios (such as Cheryl No.1 and No.2!) on file to refer back to as and when.

Not sure what sort of timeframe you have in mind but obviously tax thresholds, rates, rules, etc, do change from time to time, so an answer that's accurate today may not be in future, although this particular area of taxation has been stable for a while and the personal allowance is frozen for another few years....

JohnJaques

I have paid into more than one cash ISA during the current tax year and have reached my £20,000 limit across all of them.  
One of the cash ISAs is with Ford Money and I have a general (non-ISA) savings account with Ford Money.  This morning I made a small deosit to what I thought was the savings account at Ford Money but I mis-typed and paid into the cash ISA.
So I have now exceeded the £20,000 cash ISA allowance.  Has anyone else on this forum overpaid the £20k allowance?  Will I be in trouble with HMRC if I withdraw the overpayment immediately?  The cash ISA is "flexible" (in case that makes a difference).
Thank you in advance for any advice.

wmb194

JohnJaques said:

I have paid into more than one cash ISA during the current tax year and have reached my £20,000 limit across all of them.  
One of the cash ISAs is with Ford Money and I have a general (non-ISA) savings account with Ford Money.  This morning I made a small deosit to what I thought was the savings account at Ford Money but I mis-typed and paid into the cash ISA.
So I have now exceeded the £20,000 cash ISA allowance.  Has anyone else on this forum overpaid the £20k allowance?  Will I be in trouble with HMRC if I withdraw the overpayment immediately?  The cash ISA is "flexible" (in case that makes a difference).
Thank you in advance for any advice.

If it’s flexible then that’s fine: just withdraw the money and all will be forgiven. The provider will only report the net contribution for the tax year.

BreakingGlass

JohnJaques said:

I have paid into more than one cash ISA during the current tax year and have reached my £20,000 limit across all of them.  
One of the cash ISAs is with Ford Money and I have a general (non-ISA) savings account with Ford Money.  This morning I made a small deosit to what I thought was the savings account at Ford Money but I mis-typed and paid into the cash ISA.
So I have now exceeded the £20,000 cash ISA allowance.  Has anyone else on this forum overpaid the £20k allowance?  Will I be in trouble with HMRC if I withdraw the overpayment immediately?  The cash ISA is "flexible" (in case that makes a difference).
Thank you in advance for any advice.

My daughter accidentally (on my advice!) paid £20k into a Nationwide ISA when she had already contributed £4k to a LISA.  She contacted Nationwide and explained the error, and they simply told her to withdraw £4k from the ISA.

KneadtheDough

JohnJaques said:

I have paid into more than one cash ISA during the current tax year and have reached my £20,000 limit across all of them.  
One of the cash ISAs is with Ford Money and I have a general (non-ISA) savings account with Ford Money.  This morning I made a small deosit to what I thought was the savings account at Ford Money but I mis-typed and paid into the cash ISA.
So I have now exceeded the £20,000 cash ISA allowance.  Has anyone else on this forum overpaid the £20k allowance?  Will I be in trouble with HMRC if I withdraw the overpayment immediately?  The cash ISA is "flexible" (in case that makes a difference).
Thank you in advance for any advice.

I did something similar a few years ago. As soon as I realised, I withdrew the overpaid amount. Didn't have any repercussions (not that I know of, in any event!).

KneadtheDough

Going by the case studies/examples in Martin's guide "How the starting rate for savings works " am I correct in assuming that the following scenario would be considered to be free of taxation/owing no tax:

'Alfie' doesn't work, doesn't collect any benefits or so on, but has income made up of:

1) £3,750 (AFTER having taken a lump sum/UFPLS of £5,000.00 (5000 - 25% tax free cash = 3750),

2) Peer-to-peer interest income of, say, £5,000.00,

3) Savings interest income of, say, £4,000.00.

I'm assuming the £1,000 PSA for interest income, and also the £5,000 tax-free in interest income (the Starting savings rate) would still apply.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81875016#Comment_81875016

If total taxable income is only £12,750 then it won't be necessary to be concerned with how the multiple savings allowances stack on top of each other…

KneadtheDough

https://forums.moneysavingexpert.com/discussion/comment/81875035#Comment_81875035

Thank you. I think it's the peer-to-peer, counted as 'other interest' that confused me. Not to mention how the multiple savings allowances stack, and in which order, etc.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81875042#Comment_81875042

Worst case scenario you could have your Personal Allowance allocated so the normal savings interest is what gets taxed.

As that would be at a 0% tax rate there would be no tax to actually pay on the interest.