Accidentally withdrew money from cash ISA

MarkyMarkD

There is indeed an HMRC rule regarding "misadventure". It says that if the bank make a mistake, and fess up to HMRC, then HMRC will give them permission to reinstate the ISA.

But it also says that if the customer made the mistake, there is absolutely no leniency.

specialhat

I am an idiot and just did this with HSBC. They can't help.
What they couldn't clearly explain to me was what exactly losing my tax-free wrapper means. He couldn't explain it in simple enough terms. Does it simply mean I will be fully taxed on this year's savings?

ViolaLass

It means that the interest earned on the money that was in the ISA but is not any more will be taxed (only the interest earned once the money left the ISA will be taxed).

macman

specialhat wrote: »

I am an idiot and just did this with HSBC. They can't help.
What they couldn't clearly explain to me was what exactly losing my tax-free wrapper means. He couldn't explain it in simple enough terms. Does it simply mean I will be fully taxed on this year's savings?

No, but it means that the tax free interest status on whatever you have withdrawn is lost forever. You can't put the money back in for that tax year. Any ISA funds remaining will continue to earn interest tax free.

specialhat

Thank you! That's not as bad as I thought. The man at HSBC was incapable of explaining that to me in simple terms.

Mikeyorks

specialhat wrote: »

Thank you! That's not as bad as I thought. The man at HSBC was incapable of explaining that to me in simple terms.

Provided you cleared out the ISA completely (including any previous years subscriptions)? And therefore closed it. Then what you can do - under the 'self transfer' rules ..... is to reinstate your 2011-12 allowance only (£5340) into a fresh ISA.

I doubt HSBC will accommodate that (down to lack of knowledge rather than anything else) ..... but you can just open one elsewhere. There's a clip from an HMRC example here :--

Mrs Cooper subscribes £3,000 to a cash ISA with Anybank plc on 20 April 2008. She closes it on 30 November 2008, then subscribes to a second cash ISA with Betterhomes Building Society on 3 December 2008. The subscriptions to the second cash ISA are valid.

The full text is at 12.30 to 12.33 at this link. But it is confusing as it starts by telling you that you can't 'self transfer' ....... then how to do it acceptably! Large file, so give it a minute to open.

http://www.hmrc.gov.uk/isa/isa-guidance-notes.pdf

If you do decide to open a new one - whatever you do, do not answer 'yes' to the question asking if you've contributed this year! As you no longer have ....... and trying to explain it to the average deposit taker is going to be impossible.