Cash ISA - closed account, can I open another?

qbadger

I think this change might actually be necessitated by the new "multiple ISAs" aspect of the ISA flexibility. Previously if we subscribed to two cash ISAs, HMRC can quite easily detect this as an 'investor error' from the annual returns and auto-check if the second ISA can be deemed as valid. Now under the new ISA rules the same scenario is perfectly allowed, and we can in fact subscribe to multiple cash ISAs at the same time (in which case I'm not even sure the idea of a first and second ISA still makes sense), so they would have had to change this part of the guidance anyway. It looks like HMRC just decided to take the easy way out and remove the mechanism completely, rather than trying to adapt and make it also work with the new rule on flexible ISA replacement subscription.

masonic

qbadger said:

I think this change might actually be necessitated by the new "multiple ISAs" aspect of the ISA flexibility. Previously if we subscribed to two cash ISAs, HMRC can quite easily detect this as an 'investor error' from the annual returns and auto-check if the second ISA can be deemed as valid. Now under the new ISA rules the same scenario is perfectly allowed, and we can in fact subscribe to multiple cash ISAs at the same time (in which case I'm not even sure the idea of a first and second ISA still makes sense), so they would have had to change this part of the guidance anyway. It looks like HMRC just decided to take the easy way out and remove the mechanism completely, rather than trying to adapt and make it also work with the new rule on flexible ISA replacement subscription.

Probably true, although now if a saver fills one cash ISA to the limit and then self-transfers to another, whether it is flexible or not, HMRC will need to repair/void the second one. Whereas in the past they would have permitted it. The saver would then have lost their allowance for the year in question. I don't know how often people do this in practice, but presumably it was enough to warrant including the clause in earlier guidance.

It seems to me that all of the changes could have done with waiting for a real-time reporting system that would allow savers and ISA managers to track available allowance centrally.