Cash ISA - closed account, can I open another?

gsmh

I had a cash ISA with The Principality BC. I wanted to transfer it to Chip, but Chip doesn't allow transfers in. Foolishly I closed the Principality account and the fund were transferred to my current account. I started opening the Chip Cash ISA but there was a declaration I needed to agree to which said I hadn't opened a Cash ISA in this financial year. I stopped there and didn't continue my application.

Am I scuppered until April now? I'm new to ISAs and knowing what I know now I wouldn't have closed the Cash ISA I already had. Is there anything I can do so I don't lose this year's allowance?

boingy

Assuming you have paid any money into the Principality this tax year then yes, you are scuppered until April, but it's only a month away. Technically you could open the Chip ISA but not pay any money in until April but there's not much point doing that.

eskbanker

gsmh said:

I had a cash ISA with The Principality BC. I wanted to transfer it to Chip, but Chip doesn't allow transfers in. Foolishly I closed the Principality account and the fund were transferred to my current account. I started opening the Chip Cash ISA but there was a declaration I needed to agree to which said I hadn't opened a Cash ISA in this financial year. I stopped there and didn't continue my application.

Am I scuppered until April now? I'm new to ISAs and knowing what I know now I wouldn't have closed the Cash ISA I already had. Is there anything I can do so I don't lose this year's allowance?

No, you're not scuppered until April - you can take advantage of the one-off self-transfer mechanism if complying with these conditions:

‘Investor error’ ISA self transfer

[...]

In some cases subscriptions to a second ISA may be valid if all the following apply:

• the investor subscribes to 2 cash ISAs, in the same tax year
• subscriptions to the first ISA subscribed to were valid
• all of the current year subscriptions to the first ISA subscribed to were withdrawn (whether or not that ISA was closed) before subscriptions to the second ISA were made

This is also subject to the following requirements:

• the first cash ISA to be self-transferred in a tax year is valid and does not need to be repaired
• the second (and any subsequent) self-transferred cash ISA is not valid and is not eligible for repair

• the first cash ISA may either:

  • be closed and all the funds held in the ISA withdrawn, including any subscriptions for earlier years
  • remain open and after the self-transfer will hold only subscriptions made in previous years

If the first cash ISA remains open, no further subscriptions can be made to it in the tax year of the self-transfer.

https://www.gov.uk/guidance/close-void-or-repair-an-isa-if-youre-an-isa-manager#repair-void

gsmh

eskbanker said:

https://www.gov.uk/guidance/close-void-or-repair-an-isa-if-youre-an-isa-manager#repair-void

Thank you guys. @eskbanker , does that mean I just ignore the Chip declaration where I have to agree I've not opened another cash ISA in this finacial year?

eskbanker

gsmh said:

eskbanker said:

https://www.gov.uk/guidance/close-void-or-repair-an-isa-if-youre-an-isa-manager#repair-void

Thank you guys. @eskbanker , does that mean I just ignore the Chip declaration where I have to agree I've not opened another cash ISA in this finacial year?

Effectively, yes - the standardised declaration wording doesn't really accommodate niche scenarios such as the 'investor error' self-transfer one.

If you feel uncomfortable doing that, another option would be to open a S&S ISA and putting your 2023/24 money into that, leaving it uninvested, and then transfer it into a cash ISA as prior year money after 6 April, assuming it's no more than £10K.

gsmh

Thank you @eskbanker. I have now opened the Chip ISA and transferred my savings into it.

boingy

eskbanker said:

gsmh said:

I had a cash ISA with The Principality BC. I wanted to transfer it to Chip, but Chip doesn't allow transfers in. Foolishly I closed the Principality account and the fund were transferred to my current account. I started opening the Chip Cash ISA but there was a declaration I needed to agree to which said I hadn't opened a Cash ISA in this financial year. I stopped there and didn't continue my application.

Am I scuppered until April now? I'm new to ISAs and knowing what I know now I wouldn't have closed the Cash ISA I already had. Is there anything I can do so I don't lose this year's allowance?

No, you're not scuppered until April - you can take advantage of the one-off self-transfer mechanism if complying with these conditions:

‘Investor error’ ISA self transfer

[...]

In some cases subscriptions to a second ISA may be valid if all the following apply:

• the investor subscribes to 2 cash ISAs, in the same tax year
• subscriptions to the first ISA subscribed to were valid
• all of the current year subscriptions to the first ISA subscribed to were withdrawn (whether or not that ISA was closed) before subscriptions to the second ISA were made

This is also subject to the following requirements:

• the first cash ISA to be self-transferred in a tax year is valid and does not need to be repaired
• the second (and any subsequent) self-transferred cash ISA is not valid and is not eligible for repair

• the first cash ISA may either:

  • be closed and all the funds held in the ISA withdrawn, including any subscriptions for earlier years
  • remain open and after the self-transfer will hold only subscriptions made in previous years

If the first cash ISA remains open, no further subscriptions can be made to it in the tax year of the self-transfer.

https://www.gov.uk/guidance/close-void-or-repair-an-isa-if-youre-an-isa-manager#repair-void

Every day's a school day.
How does HMRC distinguish between that and someone deliberately cashing in an ISA and starting a new one with the money? 
Couldn't we all just do it and claim it was an error?
And will the OP hear anything from the HMRC Compliance folks?

gsmh

I suppose they will be able to see that only one cash ISA is live - given you have to supply your NI number. My previous cash ISA is closed so at any one time I have only one cash ISA open - and in any case I am well below the amount of savings/interest where any tax would be liable . . .

If HMRC should make contact I can quote their own advice back to them - as in the link supplied by @eskbanker.

eskbanker

boingy said:

Every day's a school day.
How does HMRC distinguish between that and someone deliberately cashing in an ISA and starting a new one with the money? 
Couldn't we all just do it and claim it was an error?
And will the OP hear anything from the HMRC Compliance folks?

I don't believe HMRC wants or needs to differentiate between doing this deliberately or inadvertently, but it can only be done once in any tax year.  It doesn't really seem a massively useful concession to be honest, although I suppose it could prove handy if wanting to get current year money into a new product that doesn't accept transfers.

qbadger

It may be worth noting that the one-off "self-transfer" mechanism seems to be no longer available; the same section of HMRC guidance now says:

ISA repair ‘Investor error’ ISA self transfer

ISA investors must transfer their ISAs through you. Investors cannot transfer an ISA by closing it and opening a new ISA with the new ISA manager (commonly known as ‘self-transfer’). They cannot do this even if they are moving from one ISA product to another with the same manager.

masonic

Interesting. They do seem to be fiddling around with long-established practice. The self-transfer mechanism seemed to be a way of reducing their own workload by not requiring them to act on this minor technical breach. That, coupled with the more rigorous requirements around ISA flexibility, will create a fair bit more work. I wonder if they have the resources to deal with it. This will also create some confusion in some cases where the provider allows a split-ISA, as money could ordinarily be moved freely between sub-accounts by the saver.