I didn't know this - ISA lapses if no deposit made in a year

Bogof_Babe

I have had a Cash ISA with NatWest for some years, but last year I didn't pay anything in to it, as I'm now a non-taxpayer and the interest rate was the same as my savings account.

I decided to put £3K in for this year, and did it via internet banking. Today I had a letter advising me that as I hadn't paid the minimum £1 into it during 2004/2005 then I couldn't put anything in for year 2005/2006 unless I complete a form with my details and National Insurance number etc. This seems ridiculous as it was my existing NatWest Cash ISA account I was trying to add to. They put my money back into my current account.

I'm not blaming NatWest (except that they state they sent me a letter about this at the end of the last tax year, but I'm sure I never received one), as apparently it is an Inland Revenue ruling.

I can't see the logic in this. My initial reaction is that it's just another jobsworth regulation for the civil service to waste our money on.

Anyway - be warned folks. It's worth putting a nominal sum into an existing Cash ISA, even in a year you don't plan to use it as a proper savings vehicle.

Cagey

I don`t think this can be an IR rule Babe. I have opened a few ISA`s for 3k & never added to them & the interest just compounds. Have never been told any ISA was closed because I have never added to them.

Bogof_Babe

Sorry, I might have been unclear. The money in my ISA is safe, and the interest continues. However having missed a year of feeding it, I am now in a position of having to effectively re-start it with the NI details etc., if I want to pay into it again.


Wondering now if this is some sort of check that I haven't taken one out with a different provider in the meantime - yeah I suppose that makes some sort of sense.

It's not too critical, so I don't want to start mass panic. Just an inconvenience.

dena007

Hi, what you're talking about is known as a 'non-continuous' isa. Under the R & R of inland revenue, if you fail to pay into a mini cash isa every tax year, min £1, it simply means that you have to complete a new application form. Your existing isa provider will then continue to allow you to use the same ISA to continue saving.

isasmurf

Bogof_Babe wrote:

Wondering now if this is some sort of check that I haven't taken one out with a different provider in the meantime - yeah I suppose that makes some sort of sense.

Yes, I believe that is the reason why you have to re-apply. By filling in another application form you are declaring you have not subscribed to any other ISA during that year.

The theory being that if you made a deposit to the same ISA every year you could not have started another ISA as you would have had to fill in an application form declaring the usual stuff. By missing a year you could have started a different ISA and rightly declared you had not made any deposits to another ISA that year.

But then HMRC could easily find this out for themselves as they receive details of all your ISAs every year - albeit after the end of the tax year.

cjn_2

I also fell victim to this. I'd been trying to transfer funds online only to be prevented from doing so, which I thought was very odd at the time. I wrote to HSBC who explained that it was an IR rule, although they could have made this clearer.

The solution, I suppose, is just to ensure you put in £1 a year.