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Have you paid into 2 ISAs by mistake? It’s an easy mistake that has also happened to me in the past. ISAs are great saving vehicles, but accidents happen.
If you paid into 2 ISAs by mistake, there is no need to panic. Call the ISA helpline for advice. HMRC will most likely fix your mistake at the end of the tax year without penalty.
ISA Rules in Brief
Individual savings accounts (ISAs) are tax-advantaged savings accounts. ISAs enable you to save and invest tax-free money up to £20,000 per tax year. There are different types of ISAs:
- Cash ISA
- Stocks and shares (S&S) ISA
- Lifetime ISA
- Innovative Finance ISA
- Help to Buy ISA (not available anymore)
- Junior ISA (for your child)
All ISAs share the same allowance, meaning their combined value per tax year cannot exceed £20,000. The exception is the Junior ISA, where you can add £9000. You can also pay only up to £4000 into a Lifetime ISA, contributing to the overall allowance of £20,000.
One person can open as many ISAs as they like. However, you can only open one of each type and pay in within the same tax year. The UK tax year runs from the 6th of April to the following 5th of April.
When You Can Pay into 2 ISAs
Paying into two ISAs is not always wrong. You are fine if you paid into:
- Two different ISA types (one cash ISA and one S&S ISA), and you did not exceed your allowance.
- Your ISAs in different tax years (for example, you contribute to your cash ISA in March and then again in May).
If that’s you, you do not need to do anything. Contributing to two or more different ISA types within the same tax year is allowed. Contributing to two ISAs of the same type within the same calendar year but within a different tax year is also fine.
When You Cannot Pay into 2 ISAs
You may have made a mistake if you paid into two ISAs of the same type within the same tax year. For example, you may have opened two S&S ISAs with different providers in the same tax year and contributed to both. For example, one of your S&S ISAs could be with InvestEngine and the other with Trading 212.
Another mistake would be adding money to your ISA but exceeding your £20,000 for that tax year. If you made either of these mistakes, do not worry. Each tax year, many people make the same mistake as you.
You Paid into 2 ISAs of the Same Type in the Same Tax Year
If you paid into 2 ISAs by mistake and they were of the same type, do not panic. Do not try to move money around by yourself to fix this. By doing so, you could lose out on tax benefits.
Your first port of help is the ISA helpline at 0300 200 3300. Although your circumstances may differ, the ISA helpline operators will likely tell you to do nothing. At the end of the tax year, a person from HMRC will contact you. They will then fix your issue with you.
Typically, HMRC will ask you which ISA contribution you want to keep. You will unlikely be penalised unless you are a repeat offender.
You Exceeded the £20,000 Allowance
If your two payments into your ISAs exceed the yearly allowance, the steps to resolve this are the same as described above. Call the ISA helpline and wait for the end of the tax year. You will then pay tax on the amount you saved in excess.
What to Do if You Paid into 2 ISAs by Mistake Summary
ISAs are tax-advantaged savings accounts that enable you to save and invest money tax free. There are different types of ISAs, and you have an overall allowance of £20,000.
Call the ISA helpline for advice. For most people, HMRC will tell them to wait until the end of the tax year when they fix their mistakes. If it was an honest mistake, you won’t be punished.
If you are from the US, read about the 401k and IRA UK equivalents.
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