Gone over my ISA allowance!

pete146uk

Hi All

First post here - hope you are able to help me!

In November 2024, I invested £20,000 into a Cash ISA.
I also pay a regular £150 per month into a stocks and shares fund.  But I had forgotten that I set this up as an ISA too in 2023.

I think therefore that I have overpaid into my ISAs by £1800 for this tax year (12 payments of £150pm into the stocks and shares ISA).

I don't think I will have exceeded £500 in interest from my other 'non-ISA' accounts, but I'm not entirely sure.

So my questions:
Do I have to do anything?  Will I be notified that I have overpaid, and instructed what to do?
If I am required to pay some tax on the ISA overpayments, how will this be calculated (it's hard to work out the interest on the shares isa, as they go up and down!)?

Thanks in advance

eskbanker

You don't need to do anything, and should just wait to see if HMRC identify the breach (late 2025 at the earliest) and choose to take action - they'll often forgive first time offenders.  If they do decide that there's some remedial action necessary, it'll generally be the second ISA that'll be deemed to be the invalid one, so if you funded the S&S one first and then the cash one took you over the limit, it's the latter that'll be subject to correction.

Kim_13

I wonder if it’s worth OP removing £3,000 from the Cash ISA before the end of the tax year if it is a Flexible ISA? That should see £17,000 reported by the Cash ISA and £3,000 by the S&S so no breach. If the Cash ISA is not a Flexible ISA, there is nothing you can do about it as the Cash ISA would report £20,000 irrespective of whether funds were withdrawn from it before the end of the tax year or not.

If HMRC were to void a whole ISA rather than forgiving or having the ISA manager remove £3,000 and place it in an ordinary Easy Access account and collecting the tax on the interest earned by the £3,000, OP is left in a far worse position as a result of the majority rather than the minority of their 24/25 subscriptions being void (as the S&S ISA would’ve received £150 7 months before the Cash ISA was opened.)

What is the Cash ISA you paid the £20,000 into?

pete146uk

Kim_13 said:

I wonder if it’s worth OP removing £3,000 from the Cash ISA before the end of the tax year if it is a Flexible ISA? That should see £17,000 reported by the Cash ISA and £3,000 by the S&S so no breach. If the Cash ISA is not a Flexible ISA, there is nothing you can do about it as the Cash ISA would report £20,000 irrespective of whether funds were withdrawn from it before the end of the tax year or not.

If HMRC were to void a whole ISA rather than forgiving or having the ISA manager remove £3,000 and place it in an ordinary Easy Access account and collecting the tax on the interest earned by the £3,000, OP is left in a far worse position as a result of the majority rather than the minority of their 24/25 subscriptions being void (as the S&S ISA would’ve received £150 7 months before the Cash ISA was opened.)

What is the Cash ISA you paid the £20,000 into?

It's a shawbrook 1 year fixed rate. I can withdraw for a 3 month penalty I believe.

It earns 4.7%

masonic

If it's a fixed term ISA then it won't be flexible and withdrawing won't change what is reported to HMRC.

Kim_13

pete146uk said:

Kim_13 said:

I wonder if it’s worth OP removing £3,000 from the Cash ISA before the end of the tax year if it is a Flexible ISA? That should see £17,000 reported by the Cash ISA and £3,000 by the S&S so no breach. If the Cash ISA is not a Flexible ISA, there is nothing you can do about it as the Cash ISA would report £20,000 irrespective of whether funds were withdrawn from it before the end of the tax year or not.

If HMRC were to void a whole ISA rather than forgiving or having the ISA manager remove £3,000 and place it in an ordinary Easy Access account and collecting the tax on the interest earned by the £3,000, OP is left in a far worse position as a result of the majority rather than the minority of their 24/25 subscriptions being void (as the S&S ISA would’ve received £150 7 months before the Cash ISA was opened.)

What is the Cash ISA you paid the £20,000 into?

It's a shawbrook 1 year fixed rate. I can withdraw for a 3 month penalty I believe.

It earns 4.7%

As masonic said, that won't be Flexible so there's nothing you can do to avoid £23,000 being reported to HMRC for 24/25. Irrespective of what they choose to do about it, you would only make yourself worse off by withdrawing due to the penalty involved (for no benefit whatsoever) so there's no point doing so.

Some Stocks and Shares ISAs are Flexible, but even if yours were, it might be too late at this point to get the money out in this tax year. And then there's fees, selling at a loss etc to consider.