Can I pay into two ISAs in one tax year?
I have had a cash ISA with National Savings & Investments (NS&I) for many years, to which I add my full ISA allowance every year. But I have just opened a Halifax four-year fixed-rate ISA, into which I paid another £5,640. So I've made two ISA payments in one financial year.
I mentioned my NS&I cash ISA to the Halifax employee when I opened my ISA, but she said that it wouldn't contradict ISA rules to have both as I can't make additional deposits to the fixed-rate account.
I didn't really understand what she said and I am now a little worried that I might have inadvertently broken the law. Have I? Or is it perfectly acceptable to open a fixed-rate ISA in the same year as adding to another ISA?
The rules are quite clear: you can pay into only one cash ISA per tax year. You can invest in a stocks and shares ISA as well, but not to another cash ISA. So I'm afraid the Halifax employee mis-informed you and you should take it up with the branch manager.
However, your predicament should be relatively easy to resolve. HM Revenue & Customs (HMRC) has an ISA helpline you can contact on 0845 604 1701. Call and explain the problem; it will advise you what action you need to take. If it was a genuine accident, it's quite likely you will just have to pay tax on the interest earned on the amount above your ISA allowance.
If Halifax really wanted your money, it could have suggested that you simply transferred your existing ISA funds from your NS&I ISA to the Halifax account – including the money you had invested with NS&I during the 2011/12 tax year.
How to make an ISA transfer
The four steps to making a successful ISA transfer:
1. Find a new ISA with a great interest rate that accepts transfers in
2. Apply for the ISA and fill out the cash ISA transfer form
3. Leave your money where it is and your new ISA provider will work with your old provider to transfer the money. You don't need to do a thing
4. Within 15 days of you handing over the ISA transfer form your savings should have appeared in your new ISA.
is principal of Klonowski & Co in Leeds.