The Inland Revenue must still be benefiting from the Christmas cheer with the ruling it recently made. As most people know, when it comes to investing in an Individual Savings Account there are certain rules that have to be followed to ensure it does not become liable to income and capital gains taxes.
One of the problems with ISAs is that there are two types and if you have one type, you can't have the other in the same tax year - highly confusing if finance is not your first love!
In the past, if you 'illegally' took out two ISAs (or PEPs), the first one you took out would remain but the second would have to be cancelled and any growth or income taxed.
The statements made by the Inland Revenue recently will come as great news to people that have taken out 'illegal' ISAs and have been wondering what to do (or if anyone would notice)! With effect from 8 January 2003 the amended ISA rules came into force and allow for some ISAs taken out after 6 April 2001 to be retained. If you invested in a maxi and mini ISA in the same tax year you will now be able to retain both as long as the £7,000 overall ISA limit (for a tax year) has not been breached.
The rules are fairly complex, depending on how your second ISA was deemed to be invalid or 'illegal'. Different rules apply to transfers, TESSA Only ISAs and taking out maxi and mini ISAs in the same tax year.
Ask An Adviser if you think you have an invalid ISA and need some guidance.