ISA Providers; Are most choosing to ignore the Chancellor's new ISA Reforms?

jimjames

ScarletBea said:

Edit: I know, I should have checked this before opening the first one
It seems some building societies around me allow this, so there's hope - not the best rates, but better than paying tax haha

Any financial institution can choose not to allow you to open a second ISA if their systems don't allow it. They have no control over you opening an ISA at any other bank even if some try to prevent you by asking the question. To be clear even if they ask you don't have to give them an answer or a correct answer if you aren't breaking the overall limit of £20k per year.

ScarletBea

jimjames said:

ScarletBea said:

Edit: I know, I should have checked this before opening the first one
It seems some building societies around me allow this, so there's hope - not the best rates, but better than paying tax haha

Any financial institution can choose not to allow you to open a second ISA if their systems don't allow it. They have no control over you opening an ISA at any other bank even if some try to prevent you by asking the question. To be clear even if they ask you don't have to give them an answer or a correct answer if you aren't breaking the overall limit of £20k per year.

Thanks, but I do try to follow the rules and I don't lie. Regardless of other considerations, they could go back in the future and say that lying in the form invalidates the application.

masonic

ScarletBea said:

jimjames said:

ScarletBea said:

Edit: I know, I should have checked this before opening the first one
It seems some building societies around me allow this, so there's hope - not the best rates, but better than paying tax haha

Any financial institution can choose not to allow you to open a second ISA if their systems don't allow it. They have no control over you opening an ISA at any other bank even if some try to prevent you by asking the question. To be clear even if they ask you don't have to give them an answer or a correct answer if you aren't breaking the overall limit of £20k per year.

Thanks, but I do try to follow the rules and I don't lie. Regardless of other considerations, they could go back in the future and say that lying in the form invalidates the application.

In that case, best to vote with your feet if a provider tries to interfere with your banking relationship with other providers. As someone who tries to follow the rules, a business that engages in unfair practices like this contrary to the Consumer Rights Act is not a good fit for you. The term is automatically voided from your agreement for this reason, but the principle is probably more important than the effectiveness of the restriction in your case.

Better still, raise a formal complaint before leaving and obtain compensation for the shortfall in interest you expect to receive at the next best provider. The Competition and Markets Authority or your local trading standards might also be worth contacting as this is an anti-competitive practice. Either organisation could take offending providers to court to prevent them putting these unfair terms in their consumer contracts.

VTechnician

masonic said:

@VTechnician @jimjames unfortunately HMRC has updated its guidance as of 30th April and no longer permits any flexibly withdrawn subscriptions to be replaced in a different ISA than the one it was taken from. To do as you wish would now require a series of partial transfers (if this new interpretation is enforced).

https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#flexible-isas

So @jimjames and @masonic ,
9 months after an 'education' from you astute gentlemen, may I ask: 
When it comes to moving funds between a flexible Cash ISA and a flexible IFISA such as Proplend's P2P, have either of you found a smarter method within HMRCs tax rules without penalty yet?
I woud prefer not to have to find a Cash ISA product allowing partial transfers out, and then repeatedly transferring £1,000 lumps to avoid my cash accruing zero interest while waiting to be matched with a loan?
Thank you in anticipation for your valuable time.

masonic

You are still free to flexibly withdraw money and put it in a normal savings account. It would need to be returned before the end of each tax year and could be removed again from 6th April.

If tax is going to be a major issue, then you could explore Premium Bonds if not already using them, as these have a reasonable payout for a higher rate taxpayer with average luck.

There are also low coupon gilts. For example, T26 matures in Jan 2026 and the current yield to maturity is 4.11%. Only 0.125% is regarded as interest, the rest is a tax exempt capital gain. Meaning after 40% tax you could still net 4.06%. These numbers would vary between now and April when you'd be in a position to act. This would work best for money you don't anticipate needing unless loan flow significantly picks up as if you sell early YMMV (though the closer to maturity the less scope for the price to vary).

VTechnician

masonic said:

You are still free to flexibly withdraw money and put it in a normal savings account. It would need to be returned before the end of each tax year and could be removed again from 6th April.

If tax is going to be a major issue, then you could explore Premium Bonds if not already using them, as these have a reasonable payout for a higher rate taxpayer with average luck.

There are also low coupon gilts. For example, T26 matures in Jan 2026 and the current yield to maturity is 4.11%. Only 0.125% is regarded as interest, the rest is a tax exempt capital gain. Meaning after 40% tax you could still net 4.06%. These numbers would vary between now and April when you'd be in a position to act. This would work best for money you don't anticipate needing unless loan flow significantly picks up as if you sell early YMMV (though the closer to maturity the less scope for the price to vary).

It seems that I may have phrased my question badly, again! Or I have failed to understand your answer as I have never touched Gilts. I have Premium bonds though.
I am a retired basic rate taxpayer running close to my £1000 savings interest limit.
I was refering to a scenario where by mid-Apr 2024 I had:
(1).  placed £10k of current year (CY) subscriptions in a non-flexible Cash ISA.
(2).  placed £10K CY subs in a flexible cash ISA.
(3)   an existing P2P IFISA (PropLend) with only PY subs and £0.00 CY subs. (for lending to property developer borrowers)
I then planned to slowly feed (2) into (3) in £1k tranches to submit 10x£1k 'loan parts' over 10 different loan arrangements..
Reason: Any funds in the IFISA waiting to be matched to a loan do not accrue interest. Lending opportunities via the IFISA come up roughly once a month in the current climate.
Based on the Nov 2023 announcement of ISA reforms due in Apr 2024, I had this all set up in mid-April: (2)&(3) linked to the same 'go-between' current account ready to move at will.
Then 30 days later HMRC amended the rules for flexible cash ISAS.
I have continued to move the funds from (2) to (3) throughout this Tax Year, but as we previously discussed, at risk that my ISA providers and HMRC may eventually develop the means to track and penalise me due to the 30Apr amendment, because I believe that the plan most likely infringes that amendment.
The only alternative I could imagine was multiple partial ISA transfers to achieve the same aim.
Unless that is; one of you gentlemen can advise me of a method which acieves the same aim of moving tax protected  funds into my IFISA in £k tranches over the next Tax Year without upsetting HMRC?

masonic

You wouldn't need to do partial transfers as the PropLend IF ISA is flexible. You could do a full transfer and then use flexible withdrawals to avoid the cash drag. The question then turns to what to do with the cash you flexibly withdraw, which my previous post addresses.

If you would only pay basic rate tax on interest outside an ISA, then conventional savings would still give a reasonable return.