MSE News: Budget 2015: ISAs to become fully flexible with withdrawals allowed

masonic

colsten wrote: »

You may have read something that I have overlooked, so please correct me if I have missed something. The way I interpret the law is that you can replace your current year's subscriptions, up to max the tax year's allowance. Thus playing about with previous years' subscriptions is not an option.

The bit that has led me to believe that more than just the current years subscriptions can be removed and replaced is the following...

10. After regulation 5DDA insert- “Flexible account 5DDB
...
(4) Any withdrawal of a cash amount in any year is to be deemed to be made first out of a current year’s subscription.

(5) Any replacement subscription is to be deemed to be a replacement first of any withdrawal of a cash amount made out of a previous years’ subscription.

Everything else within the document was fairly vague in defining the limits of what could be removed and replaced, but one cannot replace previous years' subscriptions if one were not able to first remove them.

colsten

I agree, there's still a lot of doubt over what the 'flexibility' covers.

In reality, however, it's a total and utter non-issue. Most savers don't have anything even near £15,240 of savings, in the current year or ever. Those that do will be most unlikely to put their money into a less than 3% account just so they can say "I have an ISA".

goRt

My use case:
I'll be using the max allowance for this tax year, but withdrawing ASAP to fill my 123s
I'll return the money to the ISA at the end of the 16/17 tax year together with that period's allowance
I'll be receiving my 25% SIPP tax free allowance in 17/18 which will then allow all my cash ISAs to be transferred to S&S ISA

I can utilise the full 15,240 and fill my 123s going forward, the issue is cashflow pending age 55.

I suspect I'm part of a very small community planning for this use case.

colsten

goRt wrote: »

I'll be using the max allowance for this tax year, but withdrawing ASAP to fill my 123s
I'll return the money to the ISA at the end of the 16/17 tax year together with that period's allowance

I doubt you will be able to do this, although others may disagree. You can only replace the subscriptions from the same tax year, and your net ISA allowance will still be £15,240.

goRt

colsten wrote: »

I doubt you will be able to do this, although others may disagree. You can only replace the subscriptions from the same tax year, and your net ISA allowance will still be £15,240.

The regulations quoted a few posts above mine don't agree with you ;-)

Ashen

I'm not sure why there's any question over it, without going into the regulations themselves, the page from October clearly says:

These regulations amend the existing ISA Regulations to establish a new flexibility within ISA which allows savers to replace cash they have withdrawn from their account earlier in a tax year, without this replacement counting towards the annual ISA limit for that year. This flexibility will be available in relation to both current year and earlier years’ ISA savings where provided for in the terms and conditions of a ‘flexible ISA’.

bowlhead99

So basically the expectation is that you can max out your current year contributions on (say) 31 March, and be left with (say) £60k in the ISA account going into the 2016/17 tax year.

On 6 April 2016 subject to the rules of your ISA you can withdraw all that £60k (your £0 of current year (16/17) contributions and £60k of prior year contributions) and stuff them into your higher interest current accounts or whatever. Then on 31 March 2017 (for example) you can re-deposit the £60k which was withdrawn earlier in the tax year without it counting as new money against your annual allowance, and you can also deposit a new £15k because your 16/17 annual allowance has so far been untouched. Then you will have £75k in the ISA going into the 17/18 tax year. Of this, all £75k can be removed on 6 April 2017, to stick it in your current account merry-go-round again, but you would need to replace it by 5 April 2018 to preserve your hefty ISA wrapper going into the 18/19 tax year.


(from the footnotes to the regs):

The regulations amend the principal regulations to provide for the terms and conditions of an account (“flexible account”) to allow a saver to replace cash they have withdrawn from their account earlier in the year, without this replacement (“replacement subscription”) counting towards their annual subscription limit which is currently £15,240 under regulation 4ZA of the principal regulations (“annual subscription limit”).

What you can't do is take £60k out of your ISA on 5 April 2016 and replace it on 5 April 2017, because when you do that later deposit they will say 'did you take this £60k out earlier in this tax year?', and you'd have to say 'no, actually I took it out in the 15/16 tax year', and you'd then be told you can't 'redeposit via a replacement subscription within same tax year' if it is not actually the same tax year. But as long as you are withdrawing and replacing in the same tax year, the amount can be £1 or it can be £60k, the regulations don't care. Subject to the terms and conditions of the product.

Maceo

I assume if you take out a fixed ISA (i.e no extra deposits or withdrawals allowed) this does not allowing.

You can probably only add to or withdraw as many times as you want (within the limit) on easy access ISAs?

Plus

Maceo wrote: »

I assume if you take out a fixed ISA (i.e no extra deposits or withdrawals allowed) this does not allowing.

You can probably only add to or withdraw as many times as you want (within the limit) on easy access ISAs?

It is up to providers to allow the 'flexible ISA' feature, so I'd imagine that fixed ISAs would not. It remains to be seen how popular it is on easy-access accounts, but I'd assume some would offer it.

Ashen

Just to further confirm - this is from Lloyds' site re: a flexible ISA:

I have £25,000 in an ISA which I have built up over a number of years. Can I withdraw £20,000 and replace it or just the current tax year’s allowance?

You can replace the full amount as long as it is in the same tax year that it was withdrawn. You can also deposit up to the annual ISA allowance (less any amount invested in a stocks and shares or innovative finance ISA).

If I transfer my ISA to another provider, or transfer my ISA from another provider to Lloyds Bank, can I replace any previous years’ subscriptions I have withdrawn in the current tax year?

Any previous years’ subscriptions that have been withdrawn must be replaced before you request an ISA transfer. Current year’s subscriptions can be replaced following the transfer as long as they are replaced in the same tax year that they were withdrawn. You can also deposit up to the annual ISA allowance (less any amount invested in a stocks and shares or innovative finance ISA).

If I withdraw funds in one tax year, can I replace them in the following tax year?

Any funds withdrawn must be replaced in the same tax year otherwise you lose the allowance and future deposits will count towards the following tax year’s allowance.