Opening second ISA with H2B

Emlo

I am paying £200 monthly into a help to buy isa and will have fulfilled the full amount of contributions (£12000) in April 2020. However my understanding is that if I pay that final £200 in April I will not be able to open a new isa for that whole tax year, is this correct?

Would it therefore be better to leave my help to buy isa £200 short to give me the opportunity of opening a new isa? Or can I still open an isa in April regardless?

Thanks

eskbanker

If you don't pay into your HTB after 5 April then it doesn't impact at all on your choices for the new tax year that starts on 6 April.

If you do pay into your HTB on or after 6 April then you can pay into another ISA in the same tax year as long as it's not a cash ISA, or if your HTB ISA is with one of the providers supporting the principle of split ISAs then you can pay into a cash ISA with them too.

In any case, there isn't actually a cap of £12K for HTB ISAs, it's just that no 25% bonus is payable on anything over that. However, interest will still be earned on the whole balance, which is likely to be better in a HTB ISA than a non-HTB cash ISA, so if you're still going to be contributing at £200/month then HTB should be an appropriate vehicle.

Finally, if you want to save more than £200/month in the 2020/21 tax year, having already paid into your HTB ISA, you may find that non-ISA accounts are just as beneficial, as interest rates on non-HTB cash ISAs are nothing special....

oli356

eskbanker wrote: »

If you do pay into your HTB on or after 6 April then you can pay into another ISA in the same tax year as long as it's not a cash ISA, or if your HTB ISA is with one of the providers supporting the principle of split ISAs then you can pay into a cash ISA with them too.

Hm, I might have messed up what I did yesterday. I've had a HTB ISA for a few years, pay in the £200/month and sometime this year it will have the £12k in, doesn't matter anyway as will not be buying a house for under £250k so can't use the bonus and will use the LISA one.

But yesterday I opened a new cash ISA (the only ISA i've opened this tax year and I paid in some £1k, was planning to put in 12.6k on Monday which would use all of my allowance up for this year (4k LISA / 2400 HTB).

Does that mean I'm breaking the ISA rules then? My plan was to continue to pay in to the HTB (considering I don't actually plan to use the bonus, I'm not sure when I need to cancel it and withdraw the money... when I buy a house I suppose).

Thinking back now, think I did mess up... what happens now...? Seems like there is a 14 day cancellation period with the cash ISA (Secure Trust Bank), so I could get the money returned and then I assume I would be ok..

Ed-1

oli356 wrote: »

But yesterday I opened a new cash ISA (the only ISA i've opened this tax year and I paid in some £1k, was planning to put in 12.6k on Monday which would use all of my allowance up for this year (4k LISA / 2400 HTB).

Does that mean I'm breaking the ISA rules then?

Yes. The ISA regulations say you can't subscribe to more than one cash ISA in the same tax year.

oli356

Ed-1 wrote: »

Yes. The ISA regulations say you can't subscribe to more than one cash ISA in the same tax year.

Feeling stupid right now ... I did try to find out before I opened the ISA if I was allowed, but clearly missunderstood the information... doh

masonic

oli356 wrote: »

But yesterday I opened a new cash ISA (the only ISA i've opened this tax year and I paid in some £1k, was planning to put in 12.6k on Monday which would use all of my allowance up for this year (4k LISA / 2400 HTB).

Does that mean I'm breaking the ISA rules then? My plan was to continue to pay in to the HTB (considering I don't actually plan to use the bonus, I'm not sure when I need to cancel it and withdraw the money... when I buy a house I suppose).

Thinking back now, think I did mess up... what happens now...? Seems like there is a 14 day cancellation period with the cash ISA (Secure Trust Bank), so I could get the money returned and then I assume I would be ok..

As above, you broke the ISA rules when you deposited £1k into the new cash ISA in the same tax year as you paid into the HTB ISA.

Did you open the new ISA online? If so you should have the right to cancel it. Otherwise, is the new ISA flexible? In which case you could reverse your error by making a flexible withdrawal. If neither of those things apply there are still options open to you. Whatever happens, the HTB ISA would be considered your valid cash ISA for 2019/20, so no need to stop paying into that.

oli356

masonic wrote: »

As above, you broke the ISA rules when you deposited £1k into the new cash ISA in the same tax year as you paid into the HTB ISA.

Did you open the new ISA online? If so you should have the right to cancel it. Otherwise, is the new ISA flexible? In which case you could reverse your error by making a flexible withdrawal. If neither of those things apply there are still options open to you. Whatever happens, the HTB ISA would be considered your valid cash ISA for 2019/20, so no need to stop paying into that.

It was opened online yes but it was a fixed 2 year one, but as its within the 14 days I should be able to just get the £1k back without a fee. Glad I read this thread....

masonic

oli356 wrote: »

It was opened online yes but it was a fixed 2 year one, but as its within the 14 days I should be able to just get the £1k back without a fee. Glad I read this thread....

Yes you mentioned you only opened it yesterday. It would need to be a cancellation under the distance selling regulations in order to avoid you having subscribed to two cash ISAs. Withdrawal from/closure of a non-flexible ISA would change nothing. Had you opened in a branch this option would not be available.

oli356

Thanks for confirming my stupdity guys.



Will close this one down then and just continue to pay into my HTB and do the same next year, as if interest is earned on the entire balance, which will be £11k or something in April, makes more sense to earn 2.5% on that instead of 1.6%~ in another ISA with £16k in (all my allowance after LISA).