Inadvertently paid into 2 Cash ISAs

Baoser

Hi all
Hope somebody can help. Have tried googling but can't the exact same situation.

In the last tax year (19/20) I had two cash ISAs with Virgin and Nationwide. For this tax year (20/21) I've made a deposit into my Virgin ISA but am still under my ISA allowance. When Nationwide announced their interest rate cut I applied for a 2 Year Fixed Rate ISA with Ford Money with the intention of transferring across the whole balance from Nationwide.

The Ford Money account had a 14 day window to fund it. However there was a delay with transfers from Nationwide. I emailed the link below to Nationwide to ask them if the transfer will be on time and the link to Ford Money on whether there would be an issue because of the delay.

www.thisismoney.co.uk/money/saving/article-8289719/Nationwide-savers-forced-wait-weeks-transfer-Isas.html

I heard back from neither in a timely manner regarding my query. Ford Money kept sending automated emails and texts saying my account would be closed if I didn't fund it within the 14 day period. The Ford account had been pulled from their available products. Not wanting to lose 2 years fixed at 1.35%, I made a £500 deposit just to keep the account open. The transfer eventually did go through.

When I opened the Ford Money account I had ticked that I hadn't paid into another cash ISA as I hadn't intended to make any deposits into the account. I had only wanted to transfer from Nationwide.

However due to the delays I've now paid into the Virgin ISA and the Ford Money ISA. I'm still under the ISA allowance for the year.

Has anybody had any experience of this and does it need rectifying?

Thank you

eskbanker

This will need rectifying but you're past the point of being able to do so yourself so will need to wait to see what HMRC will say at the end of the tax year, unless you wish to contact them proactively:

https://www.gov.uk/guidance/close-void-or-repair-an-isa-if-youre-an-isa-manager#repair-void

margaretx9

If its a first such mistake I wouldn't worry too much - its easily done - HMRC will either ignore it or contact you post the tax year end to correct for the tax on the interest on the second ISA you invested in. I expect given COVID-19 HMRC may have other priorities for resources this year!  
They may well treat the Ford isa as the one you keep - as you paid into that first. So I would keep topping that up if you still wish to use the £20k allowance. And don't pay anymore into Virgin. Ford are a split isa provider  I believe - so you can invest in more than one cash isa product with them to use your £20k allowance.
PS Why they don't allow you to invest in as many cash isas as you want up to £20,000 is beyond me.

masonic

Baoser said:

I heard back from neither in a timely manner regarding my query. Ford Money kept sending automated emails and texts saying my account would be closed if I didn't fund it within the 14 day period. The Ford account had been pulled from their available products. Not wanting to lose 2 years fixed at 1.35%, I made a £500 deposit just to keep the account open. The transfer eventually did go through.

When I opened the Ford Money account I had ticked that I hadn't paid into another cash ISA as I hadn't intended to make any deposits into the account. I had only wanted to transfer from Nationwide.

However due to the delays I've now paid into the Virgin ISA and the Ford Money ISA. I'm still under the ISA allowance for the year.

So you have £500 in a Ford Money ISA that shouldn't be there? Someone else recently started a thread with this same issue.

Stay below the overall £20k limit as HMRC regard this as a greater sin than breaching the one ISA of each type rule. Worst case the interest on the £500 becomes taxable and the £500 gets removed from the ISA, which is possibly a price worth paying for the transfer succeeding. Since the first cash ISA you pay new money into each tax year becomes your valid cash ISA for that tax year, the money and interest in your Virgin ISA is safe.

margaretx9

masonic said:

Baoser said:

I heard back from neither in a timely manner regarding my query. Ford Money kept sending automated emails and texts saying my account would be closed if I didn't fund it within the 14 day period. The Ford account had been pulled from their available products. Not wanting to lose 2 years fixed at 1.35%, I made a £500 deposit just to keep the account open. The transfer eventually did go through.

When I opened the Ford Money account I had ticked that I hadn't paid into another cash ISA as I hadn't intended to make any deposits into the account. I had only wanted to transfer from Nationwide.

However due to the delays I've now paid into the Virgin ISA and the Ford Money ISA. I'm still under the ISA allowance for the year.

So you have £500 in a Ford Money ISA that shouldn't be there? Someone else recently started a thread with this same issue.

Stay below the overall £20k limit as HMRC regard this as a greater sin than breaching the one ISA of each type rule. Worst case the interest on the £500 becomes taxable and the £500 gets removed from the ISA, which is possibly a price worth paying for the transfer succeeding. Since the first cash ISA you pay new money into each tax year becomes your valid cash ISA for that tax year, the money and interest in your Virgin ISA is safe.

Seems the problem here was caused by Nationwide taking forever to process the requested ISA transfer - not helped by Ford not being more flexible about their 15 day fixed rate ISA investment deadline when the OP had given them instructions and NW had failed to action it.
Its understandable the OP then felt under pressure to fund the Ford isa before it was closed.
I have also had an NW isa transfer take weeks and weeks for them to process.
PS Voting for the Nationwide AGM closes Monday. I voted to approve the accounts, appoint the auditors and for the rule change but voted against all the Directors and their renumeration packages. It won't make any difference - but it made me feel better! They pretend to be a caring sharing mutual but now act and pay their board no differently to a bank - perhaps they need to invest more in their staff supporting customers and give fewer bonuses to their board/directors!

masonic

margaretx9 said:

masonic said:

Baoser said:

I heard back from neither in a timely manner regarding my query. Ford Money kept sending automated emails and texts saying my account would be closed if I didn't fund it within the 14 day period. The Ford account had been pulled from their available products. Not wanting to lose 2 years fixed at 1.35%, I made a £500 deposit just to keep the account open. The transfer eventually did go through.

When I opened the Ford Money account I had ticked that I hadn't paid into another cash ISA as I hadn't intended to make any deposits into the account. I had only wanted to transfer from Nationwide.

However due to the delays I've now paid into the Virgin ISA and the Ford Money ISA. I'm still under the ISA allowance for the year.

So you have £500 in a Ford Money ISA that shouldn't be there? Someone else recently started a thread with this same issue.

Stay below the overall £20k limit as HMRC regard this as a greater sin than breaching the one ISA of each type rule. Worst case the interest on the £500 becomes taxable and the £500 gets removed from the ISA, which is possibly a price worth paying for the transfer succeeding. Since the first cash ISA you pay new money into each tax year becomes your valid cash ISA for that tax year, the money and interest in your Virgin ISA is safe.

Seems the problem here was caused by Nationwide taking forever to process the requested ISA transfer - not helped by Ford not being more flexible about their 15 day fixed rate ISA investment deadline when the OP had given them instructions and NW had failed to action it.
Its understandable the OP then felt under pressure to fund the Ford isa before it was closed.
I have also had an NW isa transfer take weeks and weeks for them to process.
PS Voting for the Nationwide AGM closes Monday. I voted to approve the accounts, appoint the auditors and for the rule change but voted against all the Directors and their renumeration packages. It won't make any difference - but it made me feel better! They pretend to be a caring sharing mutual but now act and pay their board no differently to a bank - perhaps they need to invest more in their staff supporting customers and give fewer bonuses to their board/directors!

I suspect Ford would not actually close an ISA where an active transfer request was being processed, but their communications should be clearer. Even in normal times, and with a different sending provider, transfers can take longer than 15 days to complete.

eskbanker

masonic said:
Even in normal times, and with a different sending provider, transfers can take longer than 15 days to complete.

This is an important point, as is the fact that the 15 days quoted for cash ISA transfers is actually 15 working days, i.e. three weeks, but someone obviously needs to tell the Daily Mail this, based on a quote from that linked article further back:

Transfers should be completed within 15 days, but some customers say they have been waiting for up to three weeks.

<facepalm>

Baoser

margaretx9 said:

If its a first such mistake I wouldn't worry too much - its easily done - HMRC will either ignore it or contact you post the tax year end to correct for the tax on the interest on the second ISA you invested in. I expect given COVID-19 HMRC may have other priorities for resources this year!  
They may well treat the Ford isa as the one you keep - as you paid into that first. So I would keep topping that up if you still wish to use the £20k allowance. And don't pay anymore into Virgin. Ford are a split isa provider  I believe - so you can invest in more than one cash isa product with them to use your £20k allowance.
PS Why they don't allow you to invest in as many cash isas as you want up to £20,000 is beyond me.

I hope so. I'd paid into the Virgin ISA first. Agreed, ISA allowance spread across any number of ISAs would simplify things so much more.

Baoser

masonic said:

So you have £500 in a Ford Money ISA that shouldn't be there? Someone else recently started a thread with this same issue.

Stay below the overall £20k limit as HMRC regard this as a greater sin than breaching the one ISA of each type rule. Worst case the interest on the £500 becomes taxable and the £500 gets removed from the ISA, which is possibly a price worth paying for the transfer succeeding. Since the first cash ISA you pay new money into each tax year becomes your valid cash ISA for that tax year, the money and interest in your Virgin ISA is safe.

I'd tried searching for a similar issue but couldn't find it. Tax on £500 isn't so bad. I was much more worried of losing the tax free status on the whole amount. The balance had been with Nationwide (and they were Nationwide Anglia back then) since ISAs were introduced . Have never withdrawn from it and it's just accumulating with the yearly top ups. The balance is greater than the one in my Virgin ISA as well.

Baoser

margaretx9 said:

PS Voting for the Nationwide AGM closes Monday. I voted to approve the accounts, appoint the auditors and for the rule change but voted against all the Directors and their renumeration packages. It won't make any difference - but it made me feel better! They pretend to be a caring sharing mutual but now act and pay their board no differently to a bank - perhaps they need to invest more in their staff supporting customers and give fewer bonuses to their board/directors!

Same.  

masonic

Baoser said:

masonic said:

So you have £500 in a Ford Money ISA that shouldn't be there? Someone else recently started a thread with this same issue.

Stay below the overall £20k limit as HMRC regard this as a greater sin than breaching the one ISA of each type rule. Worst case the interest on the £500 becomes taxable and the £500 gets removed from the ISA, which is possibly a price worth paying for the transfer succeeding. Since the first cash ISA you pay new money into each tax year becomes your valid cash ISA for that tax year, the money and interest in your Virgin ISA is safe.

I'd tried searching for a similar issue but couldn't find it. Tax on £500 isn't so bad. I was much more worried of losing the tax free status on the whole amount. The balance had been with Nationwide (and they were Nationwide Anglia back then) since ISAs were introduced . Have never withdrawn from it and it's just accumulating with the yearly top ups. The balance is greater than the one in my Virgin ISA as well.

No, you don't have to worry about it 'tainting' your previous years subscriptions, HMRC will treat the current year account as separate when deciding what action to take.