TWO ISA's in one year by mistake

Dilbert_Investor

Thanks Dunstonh,  i have not exceeded the limit across the two combined.  Just opened two in error and frantically trying the cancel the second.  (see separate thread).

Dilbert_Investor

If I cannot cancel the second ISA under cooling off, is it advisable to bring my error to the attention of HMRC or wait for them to contact me?

dunstonh

Dilbert_Investor said:

If I cannot cancel the second ISA under cooling off, is it advisable to bring my error to the attention of HMRC or wait for them to contact me?

Wait for them to contact you.... in about 18 months time.

Dilbert_Investor

Thats along time!
Is it best to hold the subscription in cash during that time it case it needs to be unwound, otherwise could get quite complex with dividends, etc.
I'm also assuming it any action is taken it will only relate to the this tax years subscription so I can make another in the new tax year (to a single provider) without fear?

dunstonh

Dilbert_Investor said:

Thats along time!
Is it best to hold the subscription in cash during that time it case it needs to be unwound, otherwise could get quite complex with dividends, etc.
I'm also assuming it any action is taken it will only relate to the this tax years subscription so I can make another in the new tax year (to a single provider) without fear?

invest as normal.  it won't make a difference unless you are earning over £2000 a year in dividends and having gains in excess of £12,300 a year realised.      It is rare to see a voiding/unwinding nowadays unless seriously abused or a repeat offender.  So, dont delay on the low risk of that happening.
Next tax year's allowance is unaffected by this. Each is in isolation of what has gone before.

Dilbert_Investor

Thanks Dunstonh thats good to hear.
Just so I've got in entirely clear iif the worse does happens and its voided it will only impact the invalid subscription for this year and wont effect all the previous subscriptions in the account, and I can continue to add to the same account next year.

dunstonh

Dilbert_Investor said:

Thanks Dunstonh thats good to hear.
Just so I've got in entirely clear iif the worse does happens and its voided it will only impact the invalid subscription for this year and wont effect all the previous subscriptions in the account, and I can continue to add to the same account next year.

The worst that can happen is the removal of the iSA status on the second one and on that contribution only. No previous year contributions are affected and new tax year contributions wont be either.  Just that bit.

You can hold around £150k in unwrapped holdings without suffering any tax (£2k dividend allowance and £12.3k CGT allowance equates to around £150k being needed before you are likely to trigger those).    So, if the second bit loses its ISA status to become unwrapped, its not going to create tax.   

Dilbert_Investor

sorry so the whole second account would loss its tax wrapper?

eskbanker

Dilbert_Investor said:

sorry so the whole second account would loss its tax wrapper?

Surely there's no room for misinterpretation in this?

dunstonh said:

Dilbert_Investor said:

Just so I've got in entirely clear iif the worse does happens and its voided it will only impact the invalid subscription for this year and wont effect all the previous subscriptions in the account, and I can continue to add to the same account next year.

The worst that can happen is the removal of the iSA status on the second one and on that contribution only. No previous year contributions are affected and new tax year contributions wont be either.  Just that bit.

Dilbert_Investor

I did first read it as only the current year contribution in the second account would be effected not the previous years contributions in that same account.  So, in effect the ISA account would continue just minus the current year contribution.

But the second paragraph "so if the second bit loses its ISA status to become unwrapped" made me question myself and think it could actually mean all the contributions in that particular account including previous ones too.

I was hoping my first interpretation is the correct one?