isa messed up

jonathanwolfson

I recently tried to open up an ISA with Barclays for the tax year 07 - 08. To cut to the quick, Barclays !!!!!!ed things up big time, although they repeatedly told me everything was fine, and started my ISA for 08 - 09. this means I've missed out on my 07 - 08 tax-free allowance. Barclays have offered me one year's lost interest on the £2000 I paid into the account, but haven't mentioned the loss of my tax allowance. Does anyone have a similar experience, would you accept this offer?

Lokolo

When did you try to open it?

Personally I don't know, if you left it until March I would just say your fault for leaving it too late and not give you anything, but i'm not Barclays

I doubt you'll be able to get anything more, you could try haggling but they may not take too kindly to this and not give you anything.

madonss

It really depends on how long you intended to leave the money in the account, whether or not you would have been in a postion to maximise this years contribution and finally how much hassle you are prepared to go through.

Your "loss" due to the banks mistake is the benefit of the tax free status of compound interest on up to £2000 for as long as you would have left the money in the account and the tax rules stay the same.

As it stands at the moment your allowance for 08-09 for "new money" is effectively £1600 because the £2000 from 07-08 has been paid in as if it is this tax year.
If you were only planning to put £2000 in this year anyway your "loss" is only on the £400 you now won't be able to pay in. If you were going to be able to put the full £3600 then your "loss" is on the full £2000.

To put some real numbers in;

Inside the ISA at 6.5% on £2000 you would have got £130 interest for a full year. If you are a standard rate taxpayer then outside of an ISA at 6.5% Gross (5.2 Net) you would have got £104. £26 difference in the first year.

For the following years you need to repeat the process on the difference between £2130 inside an ISA and £2104 outside (£29).

It's just over 4 years before the cummulative difference gets to the years interest you have been offered.


Be honest with yourself how much effect has this actually had in your situation.

A final thought, if you really want or need the full allowance this year, then it may be worth contacting your local Tax office to see if you can still have the account treated as if it were opened correctly.

Mikeyorks

jonathanwolfson wrote: »

but haven't mentioned the loss of my tax allowance.

So why do you think they're offering a year's Interest?

madonss wrote:

contacting your local Tax office to see if you can still have the account treated as if it were opened correctly

.... HMRC don't deal with ISAs locally. You have to contact the dedicated ISA Help Line. And they're unlikely to be amenable if the Barclays ISA Manager has considered otherwise.