So, thanks to a large family gift, I paid £20,000 into my Trading 212 ISA. I’d forgotten that my £4000 LISA subscription was counted towards the £20k limit, and I’d another £3000 subscription payment into another ISA this tax year. If I withdraw the excess subscription amount (£7k) from my T212 ISA plus say, £2-3000 to cover earned interest, to transfer into my wife’s ISA, would this essentially rectify the situation from an HMRC perspective?
You will be better calling HMRC’s ISA helpline on 0300 200 3300 Monday to Friday, 9 AM–6 PM. Explain the situation and they’ll let you know how to rectify it.
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Yes ! ! ! ! ! ! ! !
Called the HMRC helpline - they’ve said I need to contact the ISA provider to remove the excess subscription (if overpayment was within the current tax year), otherwise HMRC will contact me about any tax due on the excess subscription at the end of the tax year. Have messaged T212 support to ask them to rectify.
Sounds like you just need 212 to reduce your current year allowance to 13,000.
At the same time you can withdraw the extra contribution and move to your partners account.
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The T212 ISA is flexible so you can just remove the excess funds yourself.
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Unfortunately, this would not rectify the situation as even if flexible, the ISA is based on how much is paid in over the year and counts the highest balance held at any point.
So if you go over £20,000, simply withdrawing the excess will have no effect on tax liability. The only solution is to contact HMRC (As the OP has already done) and get the thing rectified officially through their advice, prior to the next tax year.
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Waiting for T212 to get back to me, but obv not expecting them to reply quickly over the Christmas period. From research, I believe T212 need to ‘repair’ the ISA.
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Welcome to the Community, @jfleck 
I located your communication with our team, and we’re checking the situation. We’ll get in touch once there are updates.
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Ah, thanks @Bogi.H - honestly not expecting fast replies over the Christmas period - hope your team are getting some downtime over the next day or two to enjoy Christmas! Merry Christmas!
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Just in case anyone else has this same issue in future, and is searching for an answer, here’s a full follow up.
I got a reply from T212 Customer Support:
Hi, Jonathan. Unfortunately, we’re unable to offer specific advise when it comes to repairing ISAs. Yet, as our ISA is flexible, you can increase your allowance by withdrawing the value with which you’ve oversubscribed.
This reply was a little vague, and along with the HMRC helpline’s lack of information/pointing me back to T212, didn’t give me the confidence that a withdrawal would correct the oversubscription from an HMRC perspective, so I’ve done further research on this.
Flexible ISAs are not a specific T212 product, but an instrument defined in legislation by The Individual Savings Account Regulations 1998. According to section 5DDB (4) (which governs flexible accounts):
(4) Any withdrawal of a cash amount in any year is to be deemed to be made first out of a current year’s subscription.
Additionally, the legislation defines the information to be returned to HMRC by the account manager (in this case T212). According to the regulations (Section 31 (3)(c)(iia)), in the case of a flexible ISA, the ISA manager is required to report:
the total amount subscribed to the account less the amount of any cash withdrawn from it
According to HMRC’s “Digitalisation of ISA Reporting” document for ISA managers:
the ISA manager would be required to contact the investor to advise that they have oversubscribed, requiring the investor to reduce the subscription to within their available headroom [. . .] (for example, to make a withdrawal from a flexible ISA)…
So to summarise, it looks like the regulations, and HMRC’s guidance direct that the correct course of action is indeed to make a withdrawal from the flexible ISA within the same tax year as the oversubscription. Hope this helps anyone else experiencing the same issue.
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