Page last updated at 14:48 GMT, Saturday, 26 September 2009 15:48 UK

Fixed ISA top-ups a 'grey area'

By Paul Lewis
Presenter, Radio 4's Money Box

Pound coins
Money to save, but where can you put it?

Customers of some banks and building societies are being told they cannot pay more into their ISA when the limit rises next month.

Some banks and building societies have confirmed that staff training is not complete.

But all said they were confident the staff and systems would be ready for the new rules by 6 October.

The current £3,600 cash ISA limit rises to £5,100 from 6 October for anyone born before 6 April 1960.

The rules for the new limits are complex and have been changed by HM Customs and Revenue (HMRC) between the original announcement in the Budget on 22 April and the starting date of 6 October.

Consumer confusion

Anyone aged 50 by the end of the tax year - 5 April 2010 - can make use of the higher limits when they begin on 6 October 2009.

But actually putting in the extra money can be difficult.

Pam, from Barnet in North London, told Radio 4's Money Box that she had gone into her local branch of Bradford & Bingley to invest her extra £1,500.

"I was told I couldn't because I'd got a fixed-rate cash ISA, which I had taken out in April and couldn't add to.

"I also discovered I couldn't take out another cash ISA because you can only take out one in a tax year."

A spokeswoman for Santander, the Spanish owner of Bradford & Bingley, later told the programme all ISA customers would be written to say they could top up both variable and fixed-rate ISAs.

But she admitted the bank was "currently in the process of training and communications across the business ready for the 6 October deadline."

Lenient rules

Rachel Thrussell, of the information group Moneyfacts, told the programme that such problems were common.

"Fixed-rate ISAs are a bit of a grey area," she said.

"Many institutions have said you can't top up. But some will allow you to open an additional fixed rate ISA to run alongside."

The programme was also told that the rules about opening a second ISA in a tax year are being interpreted leniently by HMRC, which will take no action as long as the cash limits are not breached.

A spokesman said that if someone did use the extra £1,500 to open another cash in the tax year, "the second cash ISA will be invalid, but repairable".

"In practice, HMRC takes no action where an invalid account is fully repairable," they said.

BBC Radio 4's Money Box is broadcast on Saturdays at 12 noon, and repeated on Sundays at 2100h. Download the podcast.

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