ISA Transfer Error

Martinoco

Hi all,

I have recently decided that a flexible ISA would work best for me and have opened a new flexible Cash ISA with Trading 212. As the interest rate is of the new ISA is better I wanted to transfer my First Direct Cash ISA funds into it

In the process of setting up the new ISA, I couldn't see my ISA when I linked the bank accounts. I thought it would be ok to transfer the money from my ISA into my current account to do the transfer but I realised this was an error as I was now going to use my allowance up in transferring the money over (as this was now no longer an ISA to ISA transfer). 

I have asked all sides for help and both banks are not interested - HMRC have said to speak to the banks. 

Should one of these parties be able to help me? (I can prove it's the same money)

It's not the end of the world but really frustrating.

Thanks,
M

Isarulesaretoocomplex

Martinoco said:

Hi all,

I have recently decided that a flexible ISA would work best for me and have opened a new flexible Cash ISA with Trading 212. As the interest rate is of the new ISA is better I wanted to transfer my First Direct Cash ISA funds into it

In the process of setting up the new ISA, I couldn't see my ISA when I linked the bank accounts. I thought it would be ok to transfer the money from my ISA into my current account to do the transfer but I realised this was an error as I was now going to use my allowance up in transferring the money over (as this was now no longer an ISA to ISA transfer). 

I have asked all sides for help and both banks are not interested - HMRC have said to speak to the banks. 

Should one of these parties be able to help me? (I can prove it's the same money)

It's not the end of the world but really frustrating.

Thanks,
M

Once you remove monies from an isa without formally using it as an isa transfer you will lose the tax status of that isa I would assume 

slinger2

If you withdraw money from a cash ISA into your (non-ISA) account and then put that money into another cash ISA then you will always use up part of your allowance, since the money going into the new ISA will count as "new" money and come out of that allowance. That applies whether or not the ISAs are flexible.

Martinoco

slinger2 said:

If you withdraw money from a cash ISA into your (non-ISA) account and then put that money into another cash ISA then you will always use up part of your allowance, since the money going into the new ISA will count as "new" money and come out of that allowance. That applies whether or not the ISAs are flexible or not.

Thanks. I was hoping there would be a way to correct it when done in error 

eskbanker

Martinoco said:

I have asked all sides for help and both banks are not interested - HMRC have said to speak to the banks. 

Should one of these parties be able to help me? (I can prove it's the same money)

No, under current rules the money counts as a new contribution against this year's £20K allowance, regardless of the fact that it was done in error - how much was it and would you otherwise have been in a position to use all of your 2025/26 allowance?

wmb194

Martinoco said:

slinger2 said:

If you withdraw money from a cash ISA into your (non-ISA) account and then put that money into another cash ISA then you will always use up part of your allowance, since the money going into the new ISA will count as "new" money and come out of that allowance. That applies whether or not the ISAs are flexible or not.

Thanks. I was hoping there would be a way to correct it when done in error 

The only way to correct it when done in error is if the account you've made the withdrawal from is a flexible Isa i.e. you just redeposit the money in the same account. It doesn't look like the First Direct Cash Isa is flexible, though.

Martinoco

eskbanker said:

Martinoco said:

I have asked all sides for help and both banks are not interested - HMRC have said to speak to the banks. 

Should one of these parties be able to help me? (I can prove it's the same money)

No, under current rules the money counts as a new contribution against this year's £20K allowance, regardless of the fact that it was done in error - how much was it and would you otherwise have been in a position to use all of your 2025/26 allowance?

Thanks. The amount transferred was £20k

Martinoco

wmb194 said:

Martinoco said:

slinger2 said:

If you withdraw money from a cash ISA into your (non-ISA) account and then put that money into another cash ISA then you will always use up part of your allowance, since the money going into the new ISA will count as "new" money and come out of that allowance. That applies whether or not the ISAs are flexible or not.

Thanks. I was hoping there would be a way to correct it when done in error 

The only way to correct it when done in error is if the account you've made the withdrawal from is a flexible Isa i.e. you just redeposit the money in the same account. It doesn't look like the First Direct Cash Isa is flexible, though.

Thanks. I could transfer the money back to my current account and back to my old ISA as I haven't paid into it this year. I was worried that both accounts would report the £20k deposit to HMRC  if I did this. 

eskbanker

Martinoco said:

wmb194 said:

Martinoco said:

slinger2 said:

If you withdraw money from a cash ISA into your (non-ISA) account and then put that money into another cash ISA then you will always use up part of your allowance, since the money going into the new ISA will count as "new" money and come out of that allowance. That applies whether or not the ISAs are flexible or not.

Thanks. I was hoping there would be a way to correct it when done in error 

The only way to correct it when done in error is if the account you've made the withdrawal from is a flexible Isa i.e. you just redeposit the money in the same account. It doesn't look like the First Direct Cash Isa is flexible, though.

Thanks. I could transfer the money back to my current account and back to my old ISA as I haven't paid into it this year. I was worried that both accounts would report the £20k deposit to HMRC  if I did this. 

Now that you've used your 2025/26 allowance, there's nothing to be gained by transferring it back to FD, which would need to be done as an actual ISA transfer rather than via withdrawal and redeposit anyway.

Hoenir

Martinoco said:

wmb194 said:

Martinoco said:

slinger2 said:

If you withdraw money from a cash ISA into your (non-ISA) account and then put that money into another cash ISA then you will always use up part of your allowance, since the money going into the new ISA will count as "new" money and come out of that allowance. That applies whether or not the ISAs are flexible or not.

Thanks. I was hoping there would be a way to correct it when done in error 

The only way to correct it when done in error is if the account you've made the withdrawal from is a flexible Isa i.e. you just redeposit the money in the same account. It doesn't look like the First Direct Cash Isa is flexible, though.

I was worried that both accounts would report the £20k deposit to HMRC  if I did this. 

The HMRC will be monitoring for abuse of the annual allowance. 

soulsaver

Is there a 14 days 'cooling off' from opening t212 ISA?