Flexible ISA and ?going over allowance

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resilie
resilie Posts: 179 Forumite
in ISAs & tax-free savings
I was in a rush to get my max ISA allowance paid in before the end of the tax year and having a LISA, S&S ISA and cash ISA I briefly lost track and paid 1500 too much into my flexible cash ISA. Realised a couple of days later and withdrew the surplus. Is there anything I need to do? Inform HMRC? Will I get some sort of penalty or is it all ok due to the "flexibility" of the cash ISA? Completely my fault but was a genuine oversight and corrected very quickly...
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  • Gordon_the_Moron
    Gordon_the_Moron Posts: 1,472 Forumite
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    I think it should be fine (though I'm not sure!) I made this mistake last year (and didn't realise and withdraw it) I got a cheque through the post for the surplus sum a few weeks after the end of the tax year and nothing else happened. If you've taken it out again I doubt they'll do anything, you could contact your bank/bs that the account is held with to be sure though.
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  • Reed_Richards
    Reed_Richards Posts: 4,196 Forumite
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    My understanding is that with a flexible ISA HMRC just look at the money in the ISA at the end of the year (compared to the start of year if appropriate). The ISA provider just has to ensure that the money added each year never exceeds £20k.

    Thinking about, if this is true it would be possible to abuse the system by having more than £20k spread across different ISAs for most of the year then reducing the total to £20k by making a withdrawal from a flexible ISA at the last minute.
    Reed
  • alternate
    alternate Posts: 700 Forumite
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    You won't get a fine. You might get a letter from the tax man. If you had not corrected it yourself then they would have refunded you the overpayment. As you did correct it you will have to pay tax on any interest that overpayment earned in those few days before you realised - assuming is rounds up to more than a penny :D
  • Reed_Richards
    Reed_Richards Posts: 4,196 Forumite
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    alternate wrote: »
    ... you will have to pay tax on any interest that overpayment earned in those few days before you realised - assuming is rounds up to more than a penny :D
    I cannot believe that it does not take hours to check to the level of detail that would find an over-payment that only existed for a short period of time. Even at minimum wage, to pay somebody for a few hours to extract a few pence worth of interest cannot be worth it.
    Reed
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    Reed_Richards wrote: »
    I cannot believe that it does not take hours to check to the level of detail that would find an over-payment that only existed for a short period of time. Even at minimum wage, to pay somebody for a few hours to extract a few pence worth of interest cannot be worth it.

    I can go online to my financial accounts and request a statement or transaction history by simply clicking a button, which takes seconds to display. Everything is done with computers these days :p They do not literally have a little old man with an adding machine sitting in the basement poring over a written ledger for a few hours per customer account.

    So an individual financial institution running an account can easily see if someone has put in more subscriptions than the limit at any point in time, or more cumulative subscriptions net of cumulative withdrawals than the limit in the case of flexible accounts.

    What the financial institutions can't know is that at a point in time you have exceeded your overall limit across all institutions - because they don't have access to your private account data held by the other institutions. Only HMRC have that data, but the reports they receive from the FIs don't say when in the year the subscriptions are made, only the total amount of subscriptions and the period-end account balance or value, together with date of the first subscription made in a tax year and account closure date if closed.
  • diggerdga
    diggerdga Posts: 3 Newbie
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    First time posting guys, go easy on me! I've just discovered flexible ISAs and am quite excited about the prospect of being able to access my ISA savings from the last 10 years, use them up until next April (for a house purchase) then put all the money back in once I have mortgaged the property in question. I've found a few providers that offer this facility but can't seem to find any stocks and shares providers. From reading this site, in theory, it is possible to use the flexible facility with a stocks and shares ISA I just have to switch the funds/shares to cash when withdrawing. I just can't seem to find a provider that offers this facility so any help would be much appreciated..
  • masonic
    masonic Posts: 23,421 Forumite
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    The Share Centre offers a flexible S&S ISA, but wouldn't it be easier just to transfer to a cash ISA for this purpose, then back to a S&S ISA when you are done?
  • diggerdga
    diggerdga Posts: 3 Newbie
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    thank you, I was just thinking of how to avoid the 30 days it takes to transfer in / out of ISA's and also keep the money invested in the markets until the day I actually need it (completion dates on properties notoriously unpredictable!). I've just checked out the share centre and they have some high fees is you want to trade - 1% doesn't sound like much but on six figures (accumulated ISA from 20 plus tax years) gets silly ! Are they really the only provider?
  • masonic
    masonic Posts: 23,421 Forumite
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    edited 15 April 2019 at 9:11PM
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    Charles Stanley Direct is the only other I'm aware of, but their 0.35% platform fee will also be quite expensive for you. Apparently at the share centre you can avoid the 1% commission on sales by paying £24 for the frequent trading option, which reduces the cost to £7.50 per deal. Whether that is cheaper or more expensive than CSD would depend on the number of funds/shares you hold and the total value - for example, if you had a £200k funds portfolio, you'd be paying around £60 per month at CSD, so TSC would likely be much cheaper at less than a fiver per month, and £24 plus n x £7.50 when you come to sell up.

    Certainly none of the cheapest providers offer flexibility. A cash transfer from a S&S to cash ISA should really be completed within a couple of weeks in practice. Remember that you'd normally need to wait about 3 working days from placing the sell orders until settlement anyway, and if you let the provider liquidate the ISA it won't be done until they are ready to send the money.

    Completion dates are notoriously unpredictable, but so are movements in the price of investments over short periods - selling up early is almost as likely to work in your favour as against you.
  • leaphaze
    leaphaze Posts: 357 Forumite
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    It is possible to mix flexibility across ISA types?

    For example pay £20,000 into Cash ISA 15th Aug, withdraw £5,000 from Cash ISA 15th Sept, pay £5,000 into S&S ISA 15th Sept.

    So using £15,000 in a Cash ISA and the rest of the annual allowance in a S&S ISA.
    Wearing my other one today.
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