Exceeding ISA allowance

[BunkMoreland]

Probably nothing.

I have 2 ISAs for this tax year.

1 Stocks and Shares - Vanguard
1 Cash - Natwest

Together they are £20k.

The Cash ISA was filled with the funds from an ISA that matured last month. Upon maturity Natwest turned it into a Instant access ISA. I asked them via their online form, to transfer in ALL the money from the matured ISA in my NEW 26-28 cash isa (still with me)

They sent me a e-letter saying "we've done the transfer, here's the details"

The out of the blue 2 days later they've transferred in £1.97. (yes less than £2) It wasn't shown on my matured isa statement, My gut is its a tiny amount of interest from the Instant access ISA. But I didn't ask them to transfer it to my new ISA. They've done that without asking me!

Problem is that takes me over the £20k by £1.97

I get that this is not going to get my collar felt. And realistically I doubt HMRC will give a st. But I'm nervous that this will somehow fk up the tax free nature of both ISAs and I'll end up paying tax on ALL of the earnings I make. Or in theory would I only have to pay tax on the £1.97?

I imagine there's some kind of penalty for "removing funds after starting an isa" as well in Natwests small print. (despite it being their fk up) So basically my question is, is it worth a no doubt 20min+ phonecall to get them to rectify it, or shall I just ignore it? And that assumes that they DO rectify it and I dont have to make another phone call next week to rectify their rectification (such is my faith in them!)




On a related note, this whole process has been dogst from Natwest. First they didn't do the transfer at all after I asked them to. A phonecall to them and the idiot woman said "oh you have to do that" (I fking did!) So I had to repeat the form and it did transfer (after 5 days!)

I wont be going with them again at maturity in 2 years!

[Cabbage Patch]

This was an ISA transfer, not a new deposit? If so it doesn’t count against the £20k limit.

[BunkMoreland]

Cabbage Patch said:

This was an ISA transfer, not a new deposit? If so it doesn't count against the £20k limit.

Yes

MATURED fixed term (2yrs) Cash isa ended. And Natwest made it into an "instant access isa" whilst I decided what to do.

That money was then transferred into a NEW isa that started this week. And I told them to close the "Instant access isa"

I dont understand the 2nd part about it not counting against the £20k limit

[Cabbage Patch]

You can transfer whatever amount you like between ISAs, as long as you follow the proper transfer process. Not withdraw and then reinvest as this will lose the ISA status.

If you haven’t made any new deposits to an ISA since April 6th you can still add £20k.

[ChrisH72]

You've transferred one ISA to another. This doesn't use up any of your allowance. The only way it would is if you withdraw it all in cash and then open a new account.

If you check your new account it should tell you how much ISA allowance you have available for this year.

I opened a 1 Yr fixed with Natwest in January and they handled the switch from Coventry with no issues.

[jules_s]

Hmm

I 'think' the OP could be right/wrong

If you stick £20k into a NW ISA they hold it for 30 days so an April deposit will see it mature in May (a month after you think it started)

I could be wrong - seems baffling

[C69]

The £20k limit refers to how much new money you can put into ISAs each tax year. It's not a limit on the value of your ISA accounts.

In which tax year did you open the matured cash ISA?

[butchstewie]

I think you need to be clear whether these were transfers.

If they were it simply doesn't matter.

The annual limits are on new money going in.

Once you've put it in the ISA wrapper you can transfer between ISAs all you like and it doesn't count as "new money" so it doesn't count towards the limit.

[Rick101]

Amazing how many people aren't clear on the rules.

Martin Lewis must be sick of saying it. 20K of NEW money each year. Transfers ISA to ISA are not counted.

[BunkMoreland]

Thanks everyone.

C69 said:

The £20k limit refers to how much new money you can put into ISAs each tax year. It's not a limit on the value of your ISA accounts.

So next year in April 2027, I could put in another £20k into my S&S Isa and it would continue to be tax free for the whole amount?

Or does that new £20k get hit for tax?

[jules_s]

BunkMoreland said:

Thanks everyone.

C69 said:

The £20k limit refers to how much new money you can put into ISAs each tax year. It's not a limit on the value of your ISA accounts.

So next year in April 2027, I could put in another £20k into my S&S Isa and it would continue to be tax free for the whole amount?

Or does that new £20k get hit for tax?

Any money in an ISA wrapper can be transferred into the following years ISA

[YouWhatAgain]

BunkMoreland said:

Thanks everyone.

C69 said:

The £20k limit refers to how much new money you can put into ISAs each tax year. It's not a limit on the value of your ISA accounts.

So next year in April 2027, I could put in another £20k into my S&S Isa and it would continue to be tax free for the whole amount?

Or does that new £20k get hit for tax?

If you made a transfer to the new ISA you can put a new £20K this tax year. You don’t have to wait until April 2027.

[Simpo Two]

BunkMoreland said:

So next year in April 2027, I could put in another £20k into my S&S Isa and it would continue to be tax free for the whole amount?

Or does that new £20k get hit for tax?

You can shovel in £20K of new money every financial year. If it doubles, no matter, you can still shovel in £20K of new money every financial year. If you picked well you might one day end up with £1M in a S&S ISA - it's still all tax free and you can still add £20K of new money every financial year.

[BunkMoreland]

Simpo Two said:

You can shovel in £20K of new money every financial year. If it doubles, no matter, you can still shovel in £20K of new money every financial year. If you picked well you might one day end up with £1M in a S&S ISA - it's still all tax free and you can still add £20K of new money every financial year.

Thats the bit I didn't know. But I understand it now.

Thanks everyone again

[butchstewie]

There is a critical piece you need to understand though.

When moving money between ISAs make sure you transfer.

Once the money is in an ISA (or multiple ISAs) think of it as money a in a collection of carrier bags with each bag held with whatever bank/institution you use for that particular ISA.

Whatever is in each bag is tax free so long as it's in the bag.

So long as the whatever is in each carrier bag get transferred from institution to institution in the carrier bag it's all part of your total ISA wrapper so it's still tax free.

The moment you withdraw out of an ISA you take it out the carrier bag. If you then pass the money to another institution to put in another ISA (carrier bag) you're taking it out of the carrier bag it was in so it counts towards your annual ISA limit when you put it in somewhere else.

So always transfer unless you are literally taking the money out to spend and you don't want it protected by that ISA wrapper.

(technically there is a thing called a flexible ISA that can act slightly differently but I think the above is the key concept to get and understand).