One ISA Per Year Rule

Atreyu107

Hi all,

Does anybody know why the revenue stipulates that you can only open one ISA per year (well, technically two if you split between Cash only and S&S Only)?

I'm fully au fait with subscription rules, but in my mind, if you're not exceeding the subscription levels, what the's problem in having multiple ISA's?

Let me preempt the 'Why would you want to contribution to two different S&S ISAs in a single year?' question. The answer is that I had my money in a DFM service a few months ago, which I took out because I was looking to buy a house. After a couple of months of looking at properties, I realised I didn't really have enough cash to buy at the time, so wanted to get back into markets (especially given the mini-correction we experienced in the summer, which was fortuitous as I cashed out in March).

So I've got cash, but the DFM strategy wasn't working for me so I want to put it back in the 100% equity fund I was using last year, which means I need to use an ex-only broker which means putting money into the (currently empty) ISA account I already have with them.

However, if I understand correctly, I can't do that. Some things in life are tough I suppose, but I'd at least like to understand the justification behind the rule.

colsten

Atreyu107 wrote: »

Does anybody know why the revenue stipulates that you can only open one ISA per year

Nowhere.

You can open as man as you wish.

You can only subscribe to one (of each, cash and S&S).

You can transfer your ISA as often as you like. I.e. move your ISA from provider A to provider B. There might be a cost involved in transferring.

Withdrawing and re-depositing doesn't count as a transfer. Although there will be some sort of a change coming next April - rules are as yet totally unclear.

Atreyu107

colsten wrote: »

Nowhere.
You can only subscribe to one (of each, cash and S&S).

Sorry, I should have clarified: I am aware that you can open as many ISAs each year as you want, but AFAIUI, if I pay in £100 of new ISA monies into Account A, and I do the same with Account B, then I'm breaking the rules.

faineant

Apart from yourself, how would anyone else (such as HMRC, banks, etc) be able to check that you have not exceeded the maximum subscription level?

Archi_Bald

faineant wrote: »

Apart from yourself, how would anyone else (such as HMRC, banks, etc) be able to check that you have not exceeded the maximum subscription level?

Easy. All ISA providers provide a report at the end of the year to the HMRC. You are easily identified by your NI number. The HMRC analysis programs will very quickly identify everyone who has been in breach of ISA rules.

jimjames

faineant wrote: »

Apart from yourself, how would anyone else (such as HMRC, banks, etc) be able to check that you have not exceeded the maximum subscription level?

HMRC will know at the end of the tax year when banks report back with all ISA subscription details. Banks wouldn't know what you've done elsewhere.

droopsnoot

I've always thought that would be a relatively simple thing - any time you attempt to pay into an ISA, the ISA provider has their software connect to a HMRC central system, provide NI number, S/C for S&S or Cash ISA, N/E for new or existing ISA, and the amount, and said gateway returns "Y" or "N" to say whether the new payment is breaking any rules.


Can't be hard, and so much easier to check stuff before people do it wrong than try to correct it after the event. It would require the HMRC to keep solid reliable records, though.

Archi_Bald

droopsnoot wrote: »

I've always thought that would be a relatively simple thing - any time you attempt to pay into an ISA, the ISA provider has their software connect to a HMRC central system, provide NI number, S/C for S&S or Cash ISA, N/E for new or existing ISA, and the amount, and said gateway returns "Y" or "N" to say whether the new payment is breaking any rules.


Can't be hard, and so much easier to check stuff before people do it wrong than try to correct it after the event. It would require the HMRC to keep solid reliable records, though.

With massive development and running costs, the ISA 'policing' system could work like that. But it doesn't, and I hope it never will as it would be a huge waste of perfectly good money.

It should be easy enough for individuals to know how much they deposited into which ISA, particularly if there's only max 1 cash and 1 S&S ISA each year to make deposits into.

Atreyu107

Archi_Bald wrote: »

Easy. All ISA providers provide a report at the end of the year to the HMRC. You are easily identified by your NI number. The HMRC analysis programs will very quickly identify everyone who has been in breach of ISA rules.

Archi_Bald wrote: »

With massive development and running costs, the ISA 'policing' system could work like that. But it doesn't, and I hope it never will as it would be a huge waste of perfectly good money.

So the 'HMRC analysis programs' are advanced enough to figure out if you've exceed the subscription limit when paying into a single account, but not nearly advanced enough to be able to add up the amounts paid into multiple accounts to see if that subscription is exceed?

If, indeed, you're correct and the Revenue runs a simple report to list off individuals that have contributed to more than one S&S ISA for example, it wouldn't take a rocket scientist to make that report calculate the overall subscription value.

The rules should be based on ensuring nobody breaches the subscription limit, rather than penalising people for making the Revenues job slightly harder in calculating it.

colsten

Atreyu107 wrote: »

The rules should be based on ensuring nobody breaches the subscription limit

Not sure what you mean by that. The rules are the rules, and if people break subscription limits or the rules, they'll eventually be pulled up by the HMRC.

Atreyu107

What I want to understand is the reasoning behind the rule? From the discussion so far, I'm still coming away with the idea that it's actually entirely arbitrary.

When I say arbitrary, I mean that it doesn't actually make a difference in terms of the scale of tax efficiency. If I put £100 here and a £100 there, it's the same as putting £200 here.

If it's honestly just because HMRC haven't designed their systems to calculate that, then fine, but I would have expected there to be more of a reason behind it.