ISA Oversubscription

danm

Any advice on best and easiest way to rectify an ISA oversubscription. 
I paid £5K into ii back in October which i totally forgot about. I more recently paid £20K into my fidelity ISA  - both were immediately invested. 
I know i have over subscribed. Am i also correct that i can only subscribe to 1 S&S ISA. 
Are there rules on how to rectify. in this example it would be easier for me to 'put right' the ii situation.
thanks in advance. 
Dan

masonic

The S&S ISA that you subscribe to first in each tax year becomes your valid S&S ISA for that tax year. In your case it would be the ii ISA. The Fidelity ISA is invalid. HMRC will decide what action to take when they receive their annual returns from ISA providers after the end of the tax year. They may void the Fidelity ISA (only the current tax year if you've paid into this ISA over multiple tax years) meaning the investments will be removed and treated as if they were bought outside the ISA. However, they may show leniency.

Any action you try to take to correct the issue is likely to be more costly than the action HMRC may take. If you wanted to ensure the other £15k of your ISA allowance doesn't go to waste, then you could look into whether the Fidelity ISA is within its cooling off period, or if it allows flexible withdrawals (edit: Fidelity ISAs are not flexible).

See also this thread where someone else had a very similar issue and the options are discussed at length: https://forums.moneysavingexpert.com/discussion/6229223/help-needed-i-subscribed-to-two-stocks-and-shares-isa-in-the-same-year

danm

Thanks Masonic. I may give HMRC a call - seems I am going to be rolling the dice on if they let it ride, or forcing the fidelity amount to be treated as GIA investments. 

Think i may just simply funding the II account to the full amount and work on the basis that the fidelity amt is now GIA - will transfer them to my wife (non tax payer) ASAP, post resolution with HMRC. Over long run lost tax benefit on that £15k allowance is going to be multiples of crystallising the error for purposes of a CGT today.