HMRC says 'we have limited knowledge' over ISA limit rule

HMRC has clarified the rules around ISAs while admitting that sometimes there's only so much it can do to help. A person contacted the tax authority about a maturing SAYE scheme. SAYE (Save As You Earn) is a scheme where you can buy shares with your savings for a fixed price, with the potential to save up to £500 a month.

The taxpayer wanted to know if the amount they could transfer out of their SAYE scheme was limited to £20,000 a year. They also wanted to know if there was an option to sell the shares once transferred over, as with a flexible ISA, so they could withdraw the cash and then reset their ISA allowance, with the potential to transfer another £20,000 from SAYE into an ISA.

In response, HMRC directed them to an advice page on the Government website with information about the SAYE scheme. But the taxpayer replied to say this had not answered their question.

HMRC said in response: "Please be aware we have limited knowledge of how ISAs are managed and we suggest you speak to your ISA manager before making any transactions." ISAs have the advantage that all your savings and investment growth is tax-free.

However, you can only deposit up to £20,000 a year into ISAs. Some ISAs are flexible, meaning you can replace funds that you have taken out during a given tax year, without this affecting your ISA allowance.

Other accounts do not have this option, meaning whenever you deposit an amount in your ISA, this will be deducted from your ISA allowance, even if you are replacing funds you took out previously. Another factor to consider when choosing an ISA is whether or not the interest rate is fixed or not.

If you go for a fixed rate, your interest rate will be fixed for the duration of the account's term. But this often means there is a penalty for closing the account early.

This is often the equivalent of a certain number of days' interest. So it's important to read the terms and conditions closely to make sure the account you choose is right for you.

Many savings providers have dropped their rates recently after the Bank of England reduced the base interest rate again. The central bank dropped the rate from 4.25 percent down to 4 percent in August.