Mistake paying in too much to this year's ISA - Am I in trouble?

Mum161111

This is 100% my fault but I got myself into a muddle over my ISA.  I withdrew  money from my (Not an ISA)  Savings Account.  I fully intended to "Top Up" "NEW money"  already paid into my new Halifax ISA to make it £20,000.  I took money out "early" from my (Not an ISA) savings account due to mature at the end of this month.

Here is where I got into a muddle.  I meant to add what I was allowed but, my big mistake, I paid the full amount from non ISA Savings and I had paid into the new ISA a total of £21450 instead of the maximum allowed £20000. 

Immediately I knew what I had done I withdrew £1450 from the ISA.  Now I have paid the maximum £20000 into this year's ISA but I had the additional £1450 in the ISA .

Do I have to let anyone know and am I in trouble because it was my mistake?  I definitely did not do it intentionally but I know, now, I had paid in too much for two full days.  It might be three days if the money is not transferred out before midnight tonight.

masonic

I am confused as to the number of ISAs in play here, because a single provider should not let this happen. It is something HMRC would expect a single provider to police and fix, so it may be worth flagging to Halifax in the first instance. HMRC would normally only get involved when two or more providers between them received more than the allowance in a single tax year. I am surprised if a major bank like Halifax didn't automatically reject subscriptions above the limit.

Just to make sure, all of this money was paid in since 6th April?

Mum161111

Thanks very much, masonic.  There are three accounts: One was a non ISA which I withdrew before maturity, one is the new Halifax ISA and the third is a Bank of Scotland ISA from last year and added to after 6th April when I had added to the new Halifax ISA on 6th April. The total 'New' money from April 6th was £21450.

As quickly as I realized I immediately withdrew £1450.  It does not excuse me but there was more than I expected in the non ISA account which I took before it matured and I immediatsly transferred all of it to this years ISA without checking properly.

masonic

In that case, it is unlikely any action would be taken, but HMRC may eventually write to you telling you not to do it again. Or they might not bother even to do that.

dunstonh

You tend to get one get-out-jail-free card from HMRC per NI number.   A warning letter usually arrives a year after the tax year end telling you not to do it again.

FlorayG

Interesting. I tried to do this once and the ISA simply refused the transaction and returned the money to the original account do they not do that now?

dunstonh

FlorayG said:

Interesting. I tried to do this once and the ISA simply refused the transaction and returned the money to the original account do they not do that now?

Most providers have systems and controls that would prevent it, just as you say.   

MeteredOut

FlorayG said:

Interesting. I tried to do this once and the ISA simply refused the transaction and returned the money to the original account do they not do that now?

dunstonh said:

FlorayG said:

Interesting. I tried to do this once and the ISA simply refused the transaction and returned the money to the original account do they not do that now?

Most providers have systems and controls that would prevent it, just as you say.   

It's not 100% clear from the posts, but I think the £21450 was over 2 ISAs, so its understandable why it wasn't prevented (even though BoS and Halifax are part of the same group).

"There are three accounts: One was a non ISA which I withdrew before maturity, one is the new Halifax ISA and the third is a Bank of Scotland ISA from last year and added to after 6th April when I had added to the new Halifax ISA on 6th April. The total 'New' money from April 6th was £21450."

Mum161111

UPDATE   Thank you all, again, for the help you have given me.  Because I was not allowed to withdraw the "excess" £1450 from the ISA online (I tried) I telephoned on Friday and it was explained that withdrawing  from a fixed ISA  would incur 90 days loss of interest/penalty.

It was explained that by transferring to a variable rate ISA I could then, penalty free, withdraw the £1450 I had "overpaid."  I agreed to this and noticed when I logged in just now that the Halifax Fixed 1 Year ISA had been changed to the variable rate one.  I immediately withdrew the £1450 to my Current Account and I feel quite relieved.

I had been paid £1.93 gross interest (which I think I am not eligible for) and it is still in the variable rate ISA along with the "Allowed" £5,000.  I'll pay the interest back but not sure how to do it.   For now it is not a worry.

Now I have £5,000 in a Halifax variable cash ISA at 1.1%  (plus the £1.93 interest) maturing on 11 April 2026.  I'll 'phone Halifax on Monday and ask if they'll let me now transfer the £5,000 back into their Fixed Rate 1 Year ISA at 4.25%.  I am expecting them to say: "No."
 
The overpayment was a genuine mistake and was definitely my fault.  You have all been really helpful and reassuring and it's a mistake I won't make again. 

Kim_13

Have Halifax actually charged you an interest penalty? They shouldn’t have done, as a new ISA comes with a 14 day cooling off period under which the ISA is treated as not having happened and HMRC would definitely never know that you had made a mistake.

Halifax’s variable ISA is flexible, therefore if they have charged a penalty rather than processing it as a cooling off cancellation, hopefully they will not now report the £1,450 withdrawn to HMRC (fixed ISAs aren’t flexible.) Otherwise I’m not sure why they facilitated this, as being the second ISA paid into, it is £1,450 into Bank of Scotland that was the invalid subscription. If Halifax report as though you had taken no action, you would still likely get a slap on the wrist over it despite paying an interest penalty in order to attempt to fix the mistake.

The 4.25% 1 Year Fix appears to still be available so Halifax should let you move the £5,000 back. The only way it wouldn’t be allowed is if they do not allow internal ISA transfers (it needs to be done as an ISA transfer given your allowance is already used, but you could go via an external Easy Access ISA and then back to Halifax if they say no.)

Mum161111

Thanks for replying  Kim_13.  I was not charged the 90 day interest penalty.  In order to avoid this penalty I accepted the advice to have the new Fixed 1 Year Cash ISA, opened on 6th April this  year,  changed to a Flexìble Variable Cash ISA.

I had paid £15000 into my Bank of Scotland Fixed 1 year Cash ISA already for this tax year..  The mistake I made was, with proceeds from a non ISA account, I paid in £6,450 to the new Halifax 1 Year Fixed Cash ISA when I should have only paid in £5000.

This was suggested to enable me to withdraw the 'over payment' £1450 penalty free.  Nothing was said about a cooling off period.  I was glad to be able to withdraw the £1450.

I'll 'phone tomorrow morning to ask if I'm allowed to transfer from the Variable Cash ISA to a Halifax 1 Year Fixed Cash ISA.  I'm anxious not to get myself into a muddle again.  Thanks very much for replying.