HMRC has issued a warning to anyone with an ISA over “incurring a charge”. People exceeding the ISA limit accidentally risk incurring a charge for oversubscribing, HMRC – which is now operating under the Labour Party government – has warned.
A Twitter/X user asked: “If I over deposited into my ISA (£4,000 over the £20,000 limit) would I be liable to pay taxes on any gains I made from that £4,000 within my stocks and shares ISA?” In reply, HMRC said: “You are likely to incur a charge for the over subscribing. Your ISA manager can advise you on this and the next steps.”
The ISA is limited to £20000. In situations where you have saved in excess of this sum in your ISAs in the tax year, you will need to discuss with your ISA providers, the removal of the excess from your ISA, incuding any interest the excess generated, and return it to you.
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The excess interest is taxable and should be declared. Individual savings accounts (ISAs) were introduced by the government to encourage us to save more in a tax-efficient way. A stocks and shares ISA is a type of ISA designed specifically for your investments.
Inside an ISA, you won’t pay income tax on any UK dividends or interest and you won’t need to worry about capital gains tax if you sell your investments for a profit. If you’re 18 or over and a UK resident for tax purposes then you can open a stocks and shares ISA. This also includes Crown servants (e.g. a diplomat or member of the civil service) working overseas.
Each year HMRC sets an ISA allowance and it’s the total amount of money you can put into ISAs that tax year. The ISA allowance for the 2024/25 tax year is £20,000. You can invest all £20,000 in a stocks and shares ISA or spread it across different ISA accounts, such as a cash ISA or Lifetime ISA.
The tax year runs from 6 April to 5 April the following year, so the current tax year 2024/2025 ends on 5 April 2025 at midnight. This means you’ve got until then to open an ISA or top up your current ISA to make the most of the £20,000 allowance.