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I paid into 2 cash ISAs last tax year... what do I do?

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I paid into 2 cash ISAs last tax year... what do I do?

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Hi there,
I opened a Santander Help to Buy ISA in 2016 and have been paying in £200/month ever since.
In July 2019 I opened a Cash ISA with Secure Trust and paid in 20k. I've just requested for this money to remain with Secure Trust in their 1 year fixed rate ISA.
Whilst researching what to do with my Help to Buy ISA I've come across a few sites that say it's not possible to pay into both a Help to Buy and Cash ISA in any one tax year. Is this correct?
I did this in 2019/20 tax year (without knowing until today!) - what should/can I do? I feel bad that I've broken the rules, although I am quite surprised I was able to open the Secure Trust account without any problems.

My initial plan was to invest another £20k in a new ISA for 2020-21, but am I right in thinking that as I've paid £800 into my Help to Buy account already this year, I can't?
Any help would much appreciated.

Replies

  • eskbankereskbanker Forumite
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    HMRC will contact you regarding your 2019/20 issue, and will likely declare the second one (Secure Trust) invalid and therefore taxable.  If you wish to discuss this with them before they contact you, you can call their ISA helpline: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/register-to-receive-bank-and-building-society-interest-without-tax-taken-off

    Secure Trust wouldn't stop you from opening a cash ISA as you could have done so with the intention of only funding it with prior year money, which would be permissible, and put the onus back on you to understand what you're signing up to when you make the declaration that you're not subscribing to another cash ISA in the same year.

    For this year, yes, now that you've paid into a HTB ISA with Santander, you can't pay any new money into another cash ISA.  If you're keen not to lose the rest of your 2020/21 ISA allowance, you can pay into another type of ISA late in the tax year (e.g. a S&S ISA, but leaving the cash uninvested) and then transfer to cash early in 2021/22, without affecting your 2021/22 allowance.
  • smidge_smudgesmidge_smudge Forumite
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    Thank you for your response.
    I've just realised I opened an ISA in 2017 as well.. as far as I know I didn't pay any additional tax during that year because of it. Could HMRC have missed this?
    I'm not sure what you mean about paying into another ISA later in the tax year. As the Secure Trust ISA was technically opened last year, but is a transfer this tax year, I'm guessing it will be okay for 2020-21?
  • eskbankereskbanker Forumite
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    I've just realised I opened an ISA in 2017 as well.. as far as I know I didn't pay any additional tax during that year because of it. Could HMRC have missed this?
    Possibly, or perhaps the second ISA wouldn't have generated sufficient taxable interest income to cause you to exceed your personal savings allowance?

    I'm not sure what you mean about paying into another ISA later in the tax year. As the Secure Trust ISA was technically opened last year, but is a transfer this tax year, I'm guessing it will be okay for 2020-21?
    I was answering your final question about your 2020/21 allowance, unrelated to your Secure Trust ISA with prior year money in it:
    My initial plan was to invest another £20k in a new ISA for 2020-21, but am I right in thinking that as I've paid £800 into my Help to Buy account already this year, I can't?
  • smidge_smudgesmidge_smudge Forumite
    70 posts
    Tenth Anniversary 10 Posts Combo Breaker
    eskbanker said:
    For this year, yes, now that you've paid into a HTB ISA with Santander, you can't pay any new money into another cash ISA.  If you're keen not to lose the rest of your 2020/21 ISA allowance, you can pay into another type of ISA late in the tax year (e.g. a S&S ISA, but leaving the cash uninvested) and then transfer to cash early in 2021/22, without affecting your 2021/22 allowance.
    I have read on MSE the following 'The rules say you can only save up to £4,000 a year in a LISA. But you could still open a cash ISAstocks & shares ISA and/or innovative finance ISA for the remainder of your tax-free allowance (or even split savings between all three).' so does that mean a LISA allows me to use the rest of my tax free allowance but a Help to Buy ISA doesn't? This seems to be a big difference between the two which isn't mentioned very much online.

  • eskbankereskbanker Forumite
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    eskbanker said:
    For this year, yes, now that you've paid into a HTB ISA with Santander, you can't pay any new money into another cash ISA.  If you're keen not to lose the rest of your 2020/21 ISA allowance, you can pay into another type of ISA late in the tax year (e.g. a S&S ISA, but leaving the cash uninvested) and then transfer to cash early in 2021/22, without affecting your 2021/22 allowance.
    I have read on MSE the following 'The rules say you can only save up to £4,000 a year in a LISA. But you could still open a cash ISAstocks & shares ISA and/or innovative finance ISA for the remainder of your tax-free allowance (or even split savings between all three).' so does that mean a LISA allows me to use the rest of my tax free allowance but a Help to Buy ISA doesn't? This seems to be a big difference between the two which isn't mentioned very much online.

    It's important to understand the types of ISA, which are explained at https://www.gov.uk/individual-savings-accounts
    There are 4 types of ISA:

    • cash ISAs
    • stocks and shares ISAs
    • innovative finance ISAs
    • Lifetime ISAs

    You can put money into one of each kind of ISA each tax year.

    HTBs are a subset of cash ISA whereas LISAs are a type of their own, so the latter does give you wider options for contributions to other ISAs if that's what you're looking to do.
  • smidge_smudgesmidge_smudge Forumite
    70 posts
    Tenth Anniversary 10 Posts Combo Breaker
    thank you, you've been really helpful.
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