Confused - ISAs - One of the Banks talking nonsense it seems :/

jr941

Hi,

Just spoke to two banks and received contradictory information. Google cannot confirm what I was told by one of the banks:

If you have a Help to buy ISA with a specific UK bank

Then the Cash/Fixed deposit ISA has to be with the '‘same’ bank to cover the remaining allowance

Why can’t we do this with some other bank which is providing higher interest rate?

I cannot confirm what I am told by Googling this.

Is the adviser talking nonsense?

Is there really a restriction to ‘one’ bank/provider, when it comes to this? The allowance is the allowance to my understanding.

What’s your take on the above?

Thanks

masonic

It is not uncommon for bank staff not to understand ISAs, but in this case they could both be correct. Only a few banks manage their ISAs as a portfolio so that you can have multiple accounts under the same ISA. If the bank does not, then currently you cannot split your cash ISA between their products. But from 6th April the rule about only being allowed to pay into one cash ISA per tax year is being scrapped.

See need-to-knows #6 from the article on the main site: https://www.moneysavingexpert.com/savings/best-cash-isa/#needtoknows

eskbanker

A Help to Buy ISA is a cash ISA, and it's true that you can only pay into one cash ISA in any tax year, unless both are with one of the providers who support the split ISA model, treating both as one ISA:

https://www.moneysavingexpert.com/savings/best-cash-isa/#accordion-content-620297425-5

jr941

Should I fill the form to transfer the money from the other bank to the bank where I also have the Help to Buy ISA? It's just I am not keen to do this because I am getting a lower interest rate here  

I really want to split the relevant total in to other bank's fixed deposit ISA

How can the both the advisers of both banks be correct?

By the way, what does HMRC do when we accidentally cross the limit of 20 k or split the funds into different ISAs of two different banks .. do we get fined or something?

eskbanker

jr941 said:

Should I fill the form to transfer the money from the other bank to the bank where I also have the Help to Buy ISA?

Which banks are they?

jr941 said:

I really want to split the relevant total in to other bank's fixed deposit ISA

I don't understand what you mean?

jr941 said:

By the way, what does HMRC do when we accidentally cross the limit of 20 k or split the funds into different ISAs of two different banks .. do we get fined or something?

It's possible that they'll remove the tax-free status of the invalid contributions, which are usually assessed to be those contributed to the second ISA, but first offenders may get away without having to do anything....

masonic

jr941 said:

Should I fill the form to transfer the money from the other bank to the bank where I also have the Help to Buy ISA? It's just I am not keen to do this because I am getting a lower interest rate here  

I really want to split the relevant total in to other bank's fixed deposit ISA

How can the both the advisers of both banks be correct?

By the way, what does HMRC do when we accidentally cross the limit of 20 k or split the funds into different ISAs of two different banks .. do we get fined or something?

If you are paying into a HTB ISA at Bank A, then if Bank A is one of the following then you can open another cash ISA with them to use the rest of your allowance:

Otherwise you will not be able to use the rest of your 2023/24 allowance in a cash ISA unless you transfer your HTB ISA to one of the above (list comes from the link eskbanker and I posted above and may not be exhaustive, but if your bank is missing it is a bad sign).

If you have any ISA savings from previous tax years, then these can be transferred to a fixed rate ISA anywhere you like.

jr941

eskbanker said:

jr941 said:

Should I fill the form to transfer the money from the other bank to the bank where I also have the Help to Buy ISA?

Which banks are they?

Natwest and Co-Op. Natwest is saying since you have Help to Buy ISA with us, you cannot use a different bank to make use of your remaining allowance. It also needs to be with the Natwest.

I CANNOT verify this information anywhere. I have tried googling. Also added HMRC in the key terms, still nothing.

jr941 said:

I really want to split the relevant total in to other bank's fixed deposit ISA

I don't understand what you mean?

Let's say help to buy ISA has 10 k so I want the remaining 10 k to be in a fixed deposit ISA of a different bank, not Natwest. Co Op is providing 4.75 percent interest. Natwest is only providing 4.60 percent 

jr941 said:

By the way, what does HMRC do when we accidentally cross the limit of 20 k or split the funds into different ISAs of two different banks .. do we get fined or something?

It's possible that they'll remove the tax-free status of the invalid contributions, which are usually assessed to be those contributed to the second ISA, but first offenders may get away without having to do anything....

Oh what are the usual consequences for people who mess up for the second time? Do I really need to be overly careful about this next year. I am finding this a bit complex to be honest to follow everything correctly

I have answered your questions above.

masonic

jr941 said:

Which banks are they?
Natwest and Co-Op. Natwest is saying since you have Help to Buy ISA with us, you cannot use a different bank to make use of your remaining allowance. It also needs to be with the Natwest.

I CANNOT verify this information anywhere. I have tried googling. Also added HMRC in the key terms, still nothing.

This is almost correct. You cannot pay money into a cash ISA with a provider other than Natwest because Natwest holds your cash ISA for the 2023/24 tax year. But also I didn't think Natwest allowed customers to pay money into another product under the same ISA, but perhaps they do.

To open your HTB ISA you would have had to make the following declaration (and you'd have been reminded of it annually):

jr941 said:

It's possible that they'll remove the tax-free status of the invalid contributions, which are usually assessed to be those contributed to the second ISA, but first offenders may get away without having to do anything....

Oh what are the usual consequences for people who mess up for the second time? Do I really need to be overly careful about this next year. I am finding this a bit complex to be honest to follow everything correctly

Maybe have a read of my earlier post to understand what happens in the next tax year. If Natwest have documented that they have advised you that you cannot do as you want, then you are less likely to get away with a first offence.

eskbanker

jr941 said:

eskbanker said:

jr941 said:

Should I fill the form to transfer the money from the other bank to the bank where I also have the Help to Buy ISA?

Which banks are they?

Natwest and Co-Op. Natwest is saying since you have Help to Buy ISA with us, you cannot use a different bank to make use of your remaining allowance. It also needs to be with the Natwest.

I CANNOT verify this information anywhere. I have tried googling. Also added HMRC in the key terms, still nothing.

NatWest states:

Paying into more than one ISA

Making payments to both a NatWest Cash ISA and a NatWest Help to Buy: ISA

You can make payments to a Help to Buy: ISA in the same tax year as a NatWest Cash ISA provided that:

The Help to Buy: ISA is held with us; and

You don't pay in more than the ISA allowance between the Cash ISA and the Help to Buy: ISA

and

You can only hold one cash ISA with NatWest.

If you already have a cash ISA with us, keep paying into that account.

You must:

• Not have subscribed to another cash ISA (including a Help to Buy: ISA with another provider) or have subscribed more than the overall subscription limit in total to a cash ISA, a stocks and shares ISA, an innovative finance ISA and a lifetime ISA in the same tax year

at https://www.natwest.com/savings/isa-overview/cash-isa.html

The rule about only funding one ISA of each type is right at the start of the main ISA page at https://www.gov.uk/individual-savings-accounts

There are 4 types of ISA:

• cash ISAs
• stocks and shares ISAs
• innovative finance ISAs
• Lifetime ISAs

You can put money into one of each kind of ISA each tax year.

although, as masonic points out, this latter restriction will be lifted in three months.

jr941 said:

eskbanker said:

jr941 said:

I really want to split the relevant total in to other bank's fixed deposit ISA

I don't understand what you mean?

Let's say help to buy ISA has 10 k so I want the remaining 10 k to be in a fixed deposit ISA of a different bank, not Natwest. Co Op is providing 4.75 percent interest. Natwest is only providing 4.60 percent 

Yes, I get that this was what you originally had in mind, but given what you now know about the rules, you'll hopefully understand that this isn't possible.  Bear in mind that £20K is the annual allowance - you can't have paid £10K into a HTB ISA this tax year, but how much have you paid into which specific accounts since 6 April 2023?

jr941 said:

eskbanker said:

jr941 said:

By the way, what does HMRC do when we accidentally cross the limit of 20 k or split the funds into different ISAs of two different banks .. do we get fined or something?

It's possible that they'll remove the tax-free status of the invalid contributions, which are usually assessed to be those contributed to the second ISA, but first offenders may get away without having to do anything....

Oh what are the usual consequences for people who mess up for the second time? Do I really need to be overly careful about this next year. I am finding this a bit complex to be honest to follow everything correctly

As above, from April, you only need to ensure that you stick to the £20K annual contribution limit, which isn't difficult.  If you repeatedly breach the rules then obviously you shouldn't expect to keep getting away with pleading ignorance, so you'd be expected to pay attention....

jr941

This is great. Thank you. I will immediately do what Natwest has asked me to do, which is to fill a transfer form and get the money transferred from CO-OP fixed deposit ISA to Natwest Fixed deposit's ISA.

Both are in their cooling off period. 

You stated:

''Yes, I get that this was what you originally had in mind, but given what you now know about the rules, you'll hopefully understand that this isn't possible.  Bear in mind that £20K is the annual allowance - you can't have paid £10K into a HTB ISA this tax year, but how much have you paid into which specific accounts since 6 April 2023?''

I can only transfer £200 to my Help To Buy ISA, so the end of year total would be £2400. 

The remaining is meant to be in the fixed deposit ISA.

jr941

By the way, if I had opted for a three year fixed deposit ISA, does that mean I am allowed to pay another 20 k in the second and third year and make my total deposit to 60 k?

(Minus the amount of the 12 k which I need to keep in my help to buy ISA). To my understanding, when I am ready to buy a property, I will get 3 k from the government based on this 12 k.

However, I don't think will be ready to buy anything any time soon and I understand the deadline for me to use this is 2029