Accidentally over-subscribed to S&S ISA - how best to reverse it?

masonic

george4064 said:

I would withdraw it and invest in a GIA, then bed & ISA it next tax year. Expect something from HMRC though.l

It's not a flexible ISA and it seems there are other subscriptions in the ISA, so HMRC would still be entitled to instruct the ISA manager to remove another £20k, representing the invalid subscriptions. Withdrawals from non-flexible ISAs do not reduce the amount subscribed. HMRC will most likely do nothing, but either way it's money unnecessarily withdrawn from the S&S ISA with no benefit to the situation.

Worked Example 16 from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/938842/Worked-ISA-Repair_Void-Examples.pdf is the closest to what we are discussing here and suggests that the ISA manager should respond to an instruction from HMRC to remove the excess subscriptions by taking into account money already withdrawn, but would I rely on an ISA manager to have such a nuanced understanding? Probably not. In any case, the course of action in Worked Example 11 (where no money was withdrawn and subscriptions were invested) seems preferable.

soulsaver

Obvious thing is to contact HMRC and ask their advice.

If you've made no transactions (so no gain) in the S&S Isa they'll likely tell you to just withdraw it.

Keep contemporaneous note of conversation outcome.
 

itm2

So I finally managed to get through to HMRC after being on hold for about 90 minutes over 2 days.
The person that I spoke to didn't seem very clued up, but after a long delay while he contacted another department, he told me that the advice was to do nothing, and wait for a letter from HMRC which would arrive after the end of the tax year. 
He wasn't able to advise on other options which might be available (e.g. converting it to a B&B ISA on April 6th if I leave the cash uninvested in the meantime), but has requested a callback for me from the relevant department. He said it would hopefully happen around the the middle of next week.
So not much help, really :0(

masonic

itm2 said:

So I finally managed to get through to HMRC after being on hold for about 90 minutes over 2 days.
The person that I spoke to didn't seem very clued up, but after a long delay while he contacted another department, he told me that the advice was to do nothing, and wait for a letter from HMRC which would arrive after the end of the tax year. 
He wasn't able to advise on other options which might be available (e.g. converting it to a B&B ISA on April 6th if I leave the cash uninvested in the meantime), but has requested a callback for me from the relevant department. He said it would hopefully happen around the the middle of next week.
So not much help, really :0(

The advice to do nothing (I assume 'nothing' was in reference to trying to correct the error) is the same advice others have received. It is good advice.

jimjames

itm2 said:

I made a £20k top-up to a S&S ISA with Interactive Investor a couple of weeks ago, using a Nationwide current account debit card. I subsequently remembered that I had already used my ISA allowance for 2021-22 last year (on a Nationwide cash ISA).

Why not close the cash ISA rather than the S&S one? Long term S&S makes far more sense in tax free wrapper than cash

itm2

jimjames said:

itm2 said:

I made a £20k top-up to a S&S ISA with Interactive Investor a couple of weeks ago, using a Nationwide current account debit card. I subsequently remembered that I had already used my ISA allowance for 2021-22 last year (on a Nationwide cash ISA).

Why not close the cash ISA rather than the S&S one? Long term S&S makes far more sense in tax free wrapper than cash

To clarify, the £20k in question did not come from a cash ISA. It was in an unwrapped savings account at the Nationwide. Although a further £20k was already invested in a cash ISA at the Nationwide (for the current tax year) - hence the problem.

masonic

itm2 said:

jimjames said:

itm2 said:

I made a £20k top-up to a S&S ISA with Interactive Investor a couple of weeks ago, using a Nationwide current account debit card. I subsequently remembered that I had already used my ISA allowance for 2021-22 last year (on a Nationwide cash ISA).

Why not close the cash ISA rather than the S&S one? Long term S&S makes far more sense in tax free wrapper than cash

To clarify, the £20k in question did not come from a cash ISA. It was in an unwrapped savings account at the Nationwide. Although a further £20k was already invested in a cash ISA at the Nationwide (for the current tax year) - hence the problem.

I believe jimjames was referring to that Nationwide cash ISA (essentially adding his voice to a couple of others suggesting the flexible withdrawal from cash ISA route as a potential solution if you insist on taking action). What you haven't clarified is whether it is a flexible cash ISA or a fixed term account (which would not be flexible).

Remember that there is £40k involved in this error, not just the £20k subscribed to the S&S ISA.

itm2

masonic said:

itm2 said:

jimjames said:

itm2 said:

I made a £20k top-up to a S&S ISA with Interactive Investor a couple of weeks ago, using a Nationwide current account debit card. I subsequently remembered that I had already used my ISA allowance for 2021-22 last year (on a Nationwide cash ISA).

Why not close the cash ISA rather than the S&S one? Long term S&S makes far more sense in tax free wrapper than cash

To clarify, the £20k in question did not come from a cash ISA. It was in an unwrapped savings account at the Nationwide. Although a further £20k was already invested in a cash ISA at the Nationwide (for the current tax year) - hence the problem.

I believe jimjames was referring to that Nationwide cash ISA (essentially adding his voice to a couple of others suggesting the flexible withdrawal from cash ISA route as a potential solution if you insist on taking action). What you haven't clarified is whether it is a flexible cash ISA or a fixed term account (which would not be flexible).

Remember that there is £40k involved in this error, not just the £20k subscribed to the S&S ISA.

I understood HMRC's advice to mean "do nothing to try to correct the problem" (i.e. including messing with the Nationwide Cash ISA that I'd already opened in the current tax year). It's a Nationwide Triple-Access account, so fairly flexible (albeit at the cost of some interest).

masonic

itm2 said:

masonic said:

itm2 said:

jimjames said:

itm2 said:

I made a £20k top-up to a S&S ISA with Interactive Investor a couple of weeks ago, using a Nationwide current account debit card. I subsequently remembered that I had already used my ISA allowance for 2021-22 last year (on a Nationwide cash ISA).

Why not close the cash ISA rather than the S&S one? Long term S&S makes far more sense in tax free wrapper than cash

To clarify, the £20k in question did not come from a cash ISA. It was in an unwrapped savings account at the Nationwide. Although a further £20k was already invested in a cash ISA at the Nationwide (for the current tax year) - hence the problem.

I believe jimjames was referring to that Nationwide cash ISA (essentially adding his voice to a couple of others suggesting the flexible withdrawal from cash ISA route as a potential solution if you insist on taking action). What you haven't clarified is whether it is a flexible cash ISA or a fixed term account (which would not be flexible).

Remember that there is £40k involved in this error, not just the £20k subscribed to the S&S ISA.

I understood HMRC's advice to mean "do nothing to try to correct the problem" (i.e. including messing with the Nationwide Cash ISA that I'd already opened in the current tax year). It's a Nationwide Triple-Access account, so fairly flexible (albeit at the cost of some interest).

Yes, I'm sure you understood that correctly. You seemed dissatisfied with that course of (non) action, though.

[Deleted User]

itm2 said:

masonic said:

itm2 said:

jimjames said:

itm2 said:

I made a £20k top-up to a S&S ISA with Interactive Investor a couple of weeks ago, using a Nationwide current account debit card. I subsequently remembered that I had already used my ISA allowance for 2021-22 last year (on a Nationwide cash ISA).

Why not close the cash ISA rather than the S&S one? Long term S&S makes far more sense in tax free wrapper than cash

To clarify, the £20k in question did not come from a cash ISA. It was in an unwrapped savings account at the Nationwide. Although a further £20k was already invested in a cash ISA at the Nationwide (for the current tax year) - hence the problem.

I believe jimjames was referring to that Nationwide cash ISA (essentially adding his voice to a couple of others suggesting the flexible withdrawal from cash ISA route as a potential solution if you insist on taking action). What you haven't clarified is whether it is a flexible cash ISA or a fixed term account (which would not be flexible).

Remember that there is £40k involved in this error, not just the £20k subscribed to the S&S ISA.

I understood HMRC's advice to mean "do nothing to try to correct the problem" (i.e. including messing with the Nationwide Cash ISA that I'd already opened in the current tax year). It's a Nationwide Triple-Access account, so fairly flexible (albeit at the cost of some interest).

I think there's a slight miscommunication here. There are basically two types of ISA in this context (flexible and non-flexible).

A flexible ISA means your ISA allowance is the total net amount you pay in over the whole year. So for instance if you pay in £20,000 in May but in June you withdraw it all then your ISA allowance for the year resets and you can pay more money in. In other words you can pay in and withdraw as often as you like as long as the net total of what you pay in over the year doesn't end up above £20,000.

A non-flexible ISA is where you can only pay in £20,000 and even if you withdraw some over the course of the year you can't add any more to make up what you took out. So if you paid in £20,000 in May and withdrew it all in June that would be it and you couldn't pay any more into an ISA because you've already used your whole allowance. Your use of the term "fairly flexible" here makes me think you're confusing this with something else like flexible access (i.e. being allowed to make withdrawals) but this is a completely different thing.

If your cash ISA is flexible you could just withdraw your £20,000 from it and it would remove that £20,000 off your ISA allowance for the year and mean the £20,000 you paid into the S&S ISA is now fine (in theory at least because technically you should have withdrawn it from the cash ISA first, but in reality that probably won't matter as you're still in the same tax year).