Overpaid ISA Allowance, what do I do?

iamconfused1

Hey,

I recently opened a fixed term Cash ISA with Virgin and put in the max allowance of £20,000.

What I didn't realise is that I already have a Help To Buy and have been making payments of £200 every month.

So at the end of the tax year I will have paid into two Cash ISAs and exceeded the allowance by £1200.

I have called the HMRC and they said I will get a letter at the end of the tax year for it to be sorted.

Hoping to get some advice on how best to proceed.

Should I transfer out £1200 of my help to buy, so that I will be under the threshold?

Should I just wait until get the letter? Im concerned that they will return my £20,000 in the new tax year and I'll have missed out on my allowance by £18800 when I could have placed it in a stocks and shares ISA?

eskbanker

As HMRC said, they'll address the matter after the end of the tax year, but chances are that'll be well past the end of the tax year.

They may simply overlook a first offence, or perhaps instruct Virgin to return £1,200 from the fixed ISA - in such scenarios the first ISA to be funded will generally be regarded as the valid one - but I don't believe that it would make sense to withdraw anything from the superior HTB product, so just leave everything as is for now....

iamconfused1

eskbanker said:

As HMRC said, they'll address the matter after the end of the tax year, but chances are that'll be well past the end of the tax year.

They may simply overlook a first offence, or perhaps instruct Virgin to return £1,200 from the fixed ISA - in such scenarios the first ISA to be funded will generally be regarded as the valid one - but I don't believe that it would make sense to withdraw anything from the superior HTB product, so just leave everything as is for now....

OK I'll see what they say. Thank you for your advice.

masonic

There's no easy fix for this one, and HMRC instruct ISA providers not to take any action themselves, so you will just need to wait for the (likely) 'don't do it again' letter from HMRC.