One of the most common mistakes involves moving money between providers without using HMRC's official ISA transfer process
ISA savers are being warned to check the rules after HMRC recovered more than £800,000 from people who made mistakes or broke regulations in the latest tax year.
New figures show the tax authority has clawed back more than £3million from ISA holders over three years, with 326 people charged an average of £9,448 each.
Freedom of Information data obtained by The Telegraph revealed annual recoveries averaged around £1million, reaching a three-year high of almost £1.3million in 2024/25.
One of the most common mistakes involved savers moving money between ISA providers without using the official transfer process.
Although withdrawing the money and paying it into a new ISA is permitted, HMRC treats the payment as a new contribution.
This could push someone over the £20,000 annual ISA allowance, particularly if they have already paid money into an account during that tax year.
Any returns earned on money above the allowance could then become taxable, potentially leaving the saver with an unexpected bill.
HMRC also recovered money from people who deliberately exceeded their allowance, withdrew funds from a Junior ISA before the child turned 18 or opened an ISA while living outside the UK.
The warning comes ahead of sweeping ISA reforms due to take effect from April 6, 2027, which have faced criticism from the savings industry and members of the Chancellor’s own party.
Under the new rules, savers under 65 will only be able to pay £12,000 a year into cash ISAs, down from the current £20,000 limit.
A 22 per cent charge will also apply to cash left uninvested inside stocks and shares ISAs.
Dame Meg Hillier, Labour chairwoman of the Treasury Select Committee, warned that the reforms risked causing "serious confusion" among savers and investors.
Rachel Vahey, of stockbroker AJ Bell, described the reforms as "unnecessary", warning that they had made ISAs "complicated and more liable to trip people up".
Kenny MacAulay, of accountancy software firm Acting Office, said the penalties amounted to "a tax on confusion, punishing ordinary savers who are just trying to save".
He warned that changes to the cash ISA limit and the rules governing uninvested money were creating confusion and resulting in "honest mistakes that are being penalised".
Mr MacAulay added: "There needs to be technology in place to catch breaches as they happen, instead of being discovered through audits months or even years after the fact when penalties build up."
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."
