Backdating an ISA subscription to a previous tax year
Can you backdate an ISA subscription to a previous tax year? The short answer is no, though an exception is explained in the next section. The tax year runs April 6th to April 5th of the following tax year, e.g., 6th April 2021 to 5th April 2022. If you fail to fully utilise your full ISA allowance before April 6th, then that allowance has been lost forever and cannot be utilised.
ISA Provider Error
The exception to this rule is where your ISA provider has failed to carry out your instructions to subscribe before the end of the tax year.
The general principle here is that an investor should not be disadvantaged due to an error by their ISA provider. Hence if you gave your provider an instruction to subscribe within the tax year(or had a mandate in place to subscribe every year), had a valid application form or rolling application form in place with your provider and they held sufficient funds or assets on your behalf to make that subscription, then in the event they failed to make that subscription before the end of the tax year, they can and indeed should back date your subscription to the prior tax year.
In the above circumstances, your ISA provider is free to go ahead and complete the previous year subscription they missed. Also they can potentially make an ex-gratia payment to your ISA account to cover any loss that can be accurately attributed to the delay. If the ISA provider is unsure, they can refer to HMRC and ask permission to make the backdated subscription. HMRC will take each request on a case by case basis, but in the above scenario, they almost certainly would give permission, if the provider can show they were at fault for the missed subscription and not the investor.
Withdrawals not replaced during the tax year
Whilst replacement subscriptions and not actually subscriptions, they follow exactly the same rules. If the investor forgets to replace a withdrawal before the end of the tax year, then the right to make that subscription is lost. If the investor did give such an instruction, but it was not actioned by their ISA provider before the end of the tax year, then the provider will be able to replace those funds even after the end of the tax year. This, of course, only applies to flexible ISA accounts.