Bank closed ISA in error

granta

marymck said:

Thanks to all for your help and encouragement. I have now heard from the Complaints person. She was very apologetic and assures me that Nationwide have opened a new ISA in my late husband's name and backdated it to the day that they mistakenly closed his original ISA (23nd Oct). 
She has promised me a letter setting all that out, so that I can use it should HMRC come calling, along with statements for both ISAs. She offered me £150 compensation.
Somewhat distressingly I then received a letter addressed to my late husband, asking him to sign an ISA declaration.
I told the Complaints lady about that. It was yet another sloppy mistake by Nationwide, for which she apologised and upped the compensation to £200. 
I understand the compensation is taxable.

Thanks for the update and pleased to see that they have resolved this for you. The compensation amount seems about right for this kind of mistake (based on past experience) though often doesn't feel enough where the payment doesn't match the distress level. But good that they acknowledged the additional sloppiness with a token payment.

I don't believe the compensation is subject to taxation.

I hope the final stages of this work out more smoothly for you to bring to a close.

retiredbanker1

Your are taxed on income and savings interest - you are never taxed on compensation.

marymck

Thanks for the very helpful link Fiorlento and thanks too to Granta and Retiredbanker for your comments. I did ask Nationwide about whether I needed to declare the compensation on a self assessment tax return. They didn't know and said I needed to ask HMRC. But from what you've all now said and from Fiorlento's link, I don't have to. One less thing to worry about as I'm already fazed by the prospect of doing tax returns for my late husband.
Thank you all.