HMRC raked in £800,000 in fines from ISA savers last year, new figures show, prompting warnings that costly mistakes are being made due to the complexity of the system. Data obtained via a Freedom of Information request by the Telegraph revealed that the taxman collected more than £3 million in taxes and penalties over the past three years.
In the 2024-25 tax year alone, HMRC earned £1.3 million from ISA-related fines, with 326 account holders issued penalties averaging £9,448.32 each. Common errors included failing to use HMRC’s official transfer process when moving money between providers and withdrawing funds from a Junior ISA before the child turns 18. Financial advisers have described the fines as a “tax on confusion”.
The findings come ahead of changes to cash ISAs next April, when the annual allowance will be cut from £20,000 to £12,000, a move announced by former Chancellor Rachel Reeves. Critics argue that the reforms will add further complexity to an already convoluted system.
Holly Mackay, founder and chief executive of Boring Money, accused the Treasury of “cutting off its nose to spite its face”. She noted that 42 per cent of cash-only savers say simplicity is the most important factor when choosing an investment product, warning that “pointless complexity” will deter people from investing. “If we keep going like this, ISAs will become as riddled with complexity as pensions, which is bad news,” she said.
Rachel Vahey, head of public policy at AJ Bell, said the reforms missed the opportunity for radical simplification. “Rather than minimise friction between saving and investing, these reforms reduce flexibility, entrench the divide between cash and investment accounts and introduce tax charges and complex age-related allowances,” she said. She added that many would-be investors would “stick with what they know: cash”.
An HMRC spokesman said: “ISAs play an important role in helping people save and invest efficiently, and we provide clear guidance to help savers and ISA providers comply with the rules. Where breaches are identified, we work with ISA providers to correct errors and, where appropriate, penalties may apply. Anyone who believes a penalty has been charged incorrectly has the right to appeal.”
