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

masonic

Deleted_User said:

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and mean the £20,000 you paid into the S&S ISA is now fine (in theory at least because technically you should have withdrawn it from the cash ISA first, but in reality that probably won't matter as you're still in the same tax year).

The Nationwide Triple-access ISA is flexible, and the annual returns to HMRC do not specify dates of flexible withdrawals (only date of first subscription), so the suggestion would work. But if one were faced with expending their one-off free pass from HMRC, oversubscribing £20k would be the way to go, not some trivial error like paying a few quid into a second cash ISA.

itm2

Ah OK yes I was misunderstanding what was meant re. the account being "flexible". I suppose the only potential downside of emptying the Nationwide cash ISA would be the potential loss of tax relief on any interest received so far, although that's probably minimal.
I'm not sure how the annual returns from Nationwide and II to HMRC would look though - two initial £20k subscriptions in the same tax year???

masonic

itm2 said:

Ah OK yes I was misunderstanding what was meant re. the account being "flexible". I suppose the only potential downside of emptying the Nationwide cash ISA would be the potential loss of tax relief on any interest received so far, although that's probably minimal.
I'm not sure how the annual returns from Nationwide and II to HMRC would look though - two initial £20k subscriptions in the same tax year???

There would be no loss of tax relief, flexible withdrawals are within the rules and have no consequence on the status of accrued/received interest. Money flexibly withdrawn from a current year ISA of one type can be repaid into an ISA of another type (e.g. cash ISA to S&S ISA). It is treated as though the money was originally paid into the destination ISA.

itm2

masonic said:

itm2 said:

Ah OK yes I was misunderstanding what was meant re. the account being "flexible". I suppose the only potential downside of emptying the Nationwide cash ISA would be the potential loss of tax relief on any interest received so far, although that's probably minimal.
I'm not sure how the annual returns from Nationwide and II to HMRC would look though - two initial £20k subscriptions in the same tax year???

There would be no loss of tax relief, flexible withdrawals are within the rules and have no consequence on the status of accrued/received interest. Money flexibly withdrawn from a current year ISA of one type can be repaid into an ISA of another type (e.g. cash ISA to S&S ISA). It is treated as though the money was originally paid into the destination ISA.

So if the Nationwide cash ISA was flexible, I emptied it tomorrow, and invested the £20k already transferred to the S&S ISA at Interactive Investor, that would be within the ISA rules?

masonic

itm2 said:

masonic said:

itm2 said:

Ah OK yes I was misunderstanding what was meant re. the account being "flexible". I suppose the only potential downside of emptying the Nationwide cash ISA would be the potential loss of tax relief on any interest received so far, although that's probably minimal.
I'm not sure how the annual returns from Nationwide and II to HMRC would look though - two initial £20k subscriptions in the same tax year???

There would be no loss of tax relief, flexible withdrawals are within the rules and have no consequence on the status of accrued/received interest. Money flexibly withdrawn from a current year ISA of one type can be repaid into an ISA of another type (e.g. cash ISA to S&S ISA). It is treated as though the money was originally paid into the destination ISA.

So if the Nationwide cash ISA was flexible, I emptied it tomorrow, and invested the £20k already transferred to the S&S ISA at Interactive Investor, that would be within the ISA rules?

The withdrawal is really supposed to happen before the money is subscribed to the other ISA, but HMRC will not receive enough information to distinguish the order of events, so it will appear to be within the ISA rules. I suspect we are just talking about a few days difference here in any case.

[Deleted User]

Hi,

could maybe transfer NW to II, or would that complicate things further?

Look HERE.

masonic

[Deleted User] said:

Hi,

could maybe transfer NW to II, or would that complicate things further?

Look HERE.

That would result in the OP subscribing £40k to II. The problem is not that two ISAs were paid into, it's perfectly fine to pay into a cash and S&S ISA, but it is not fine to pay in a total of £40k during the same tax year.

itm2

The cash ISA in question is a 1 Year Triple Access ISA. I've been trawling the product info/T&Cs and can't tell whether it's possible to withdraw ALL of the funds. The only limitation seems to be that there is an interest rate penalty if more than 3 withdrawals are made in the same tax year (so far no withdrawals have been made from it).
Does anyone know what the situation is if you make a full withdrawal?

masonic

itm2 said:

The cash ISA in question is a 1 Year Triple Access ISA. I've been trawling the product info/T&Cs and can't tell whether it's possible to withdraw ALL of the funds. The only limitation seems to be that there is an interest rate penalty if more than 3 withdrawals are made in the same tax year (so far no withdrawals have been made from it).
Does anyone know what the situation is if you make a full withdrawal?

If you've reviewed the T&Cs and not found conditions restricting the size of the withdrawal, then you have your answer. Any such limitations would need to be pointed out prominently where making the statement around allowing 3 withdrawals. Typically those who use such accounts would use the third withdrawal to make a full withdrawal, to move the money elsewhere that permits penalty-free access.

[Deleted User]

Hi,

don't think it matters which account you withdraw the money from, you have still subscribed to 2 x ISA in same tax year, and even withdrawing £20k from one, doesn't annul that account.