Mistake in Cash ISA 24 May 2022 at 1:08PM in ISAs & tax-free savings 5 replies 311 views

skivina

I've noticed that I made a glaring error in my Virgin Money accounts.  I had a e-Cash ISA with Virgin Money and in March 2019 as it was earning next to nothing, I transferred into what I thought was another e-ISA paying a little more interest.  Since then I have paid in the maximum £20,000 in the tax years 19/20 and 20/21.  Imagine my horror to discover that the e-Account was a normal Savings Account and not an ISA.  Also the Bank has closed the ISA from which the transfer was made.
Is there anything I can do to get the Bank to rectify this?  I accept it's my error but I was hoping that there might be a way to at least mitigate some of the loss - other than using £20,000 of it in the current tax year 22/23.  There have been no transactions other than the payments in mentioned above.
Many thanks.

Albermarle

As it is your error, then I am sure nothing can be done now.

hat there might be a way to at least mitigate some of the loss 

What have you actually materially lost? Probably the non ISA account paid more interest than the ISA account.

Unless you have large savings, cash ISA's are largely redundant for most people, due to the Personal savings allowance.

refluxer

Unfortunately, as it was your fault and not the bank's, I can't see any way this can be rectified, otherwise it would provide a pathway for anyone who had moved out of an ISA and then subsequently just changed their minds to move back.

One thing you could look into is whether you actually need your money in an ISA. If you're a basic rate tax payer and do earn more than £1000/year in interest, interest rates on (non-ISA) fixed rate accounts are so much higher currently that you might (depending on your circumstances) still be better off even if you have to pay tax on some of the interest.

https://www.moneysavingexpert.com/savings/personal-savings-allowance/

masonic

An ISA transfer always involves using an ISA transfer authority form (either online or paper) from the new provider to instruct your existing provider to perform a transfer from old provider to new provider. It never involves a transfer by the customer. As such, it is not an error that can be easily made if exercising reasonable care and attention.

You could probably seek some solace in the fact that an cash ISA is of little benefit to most people, although if you now have £60k in savings, you could well be subject to some income tax on some of it. Still, it is unlikely you wouldn't be better off in terms of net interest because of your mistake (unless a higher or additional rate taxpayer).

Of more concern would be the impact of inflation on your cash if you intend to save it over the long term. Is there any reason you are keeping so much cash?

Keep_pedalling

What losses have you made? Cash ISAs pay lower rates of interest than savings accounts outside ISAs and if you are a basic rate tax payer you will need to need to earn more than £1000 of interest before you pay any tax on it, which is why for most of us Cash ISAs are a waste of time.

canaldumidi

skivina said:

I've noticed that I made a glaring error in my Virgin Money accounts.  I had a e-Cash ISA with Virgin Money and in March 2019 as it was earning next to nothing, I transferred into what I thought was another e-ISA paying a little more interest. .

Transferred how? If you managed the transfer yourself by withdrawing the money and moving it to the new account, then clearly it was not an ISA transfer, so even if the new account had been an ISA you'd have lost the ISA wrapping and it would have been treated as 'new' money (ie that year's ISA contribution).

On the other hand, if you used the ISA transfer mechanism by instructing the new bank to arrange the transfer from the old bank, then the new account must have been an ISA.....