Can I transfer part of this year's S&S ISA into LISA?

johnnybaloney

Hi,

I got carried away with my S&S ISA, used up this tax year's entire allowance and forgot about the LISA. Is it possible to transfer part of my S&S ISA into a LISA?

I came across the following on HL pages, but don't know if this is their own policy or one of the ISA transfer rules:

If you’re transferring ISAs from this tax year, you’ll need to transfer all the money you’ve put in so far. If this goes over your available Lifetime ISA allowance then you won't be able to transfer this tax year.

eskbanker

In general you can't split up current year ISA contributions, but there is a loophole with flexible ISAs whereby you can make a partial withdrawal from one of these and then return the money to a different ISA, as explained at https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#f-isa

Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule.

johnnybaloney

Thank you, so there is still a chance as my S&S ISA is flexible. This sounds almost too straightforward to be true so I enquired at the source and destination providers to see what they say

johnnybaloney

I received a response from Vanguard who hold my current year's S&S ISA and they say:

Flexi ISA rules only count for the ISA you are withdrawing from. You should not technically withdraw £4,000.00 from us and pay this in to a Stocks & Shares LISA elsewhere as the allowance is already used with us and the £4,000.00 of flexible allowance would remain in your Vanguard ISA.

They seem to suggest that withdrawals from flexible ISA have to return to the same provider.

masonic

johnnybaloney said:

I received a response from Vanguard who hold my current year's S&S ISA and they say:

Flexi ISA rules only count for the ISA you are withdrawing from. You should not technically withdraw £4,000.00 from us and pay this in to a Stocks & Shares LISA elsewhere as the allowance is already used with us and the £4,000.00 of flexible allowance would remain in your Vanguard ISA.

They seem to suggest that withdrawals from flexible ISA have to return to the same provider.

They are incorrect. You should direct them to https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#f-isa and suggest they liaise with HMRC if there is anything they don't understand. In particular: "[flexible ISA] Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule."

It is a shame that so many ISA managers do not understand the ISA rules.

johnnybaloney

Thanks, I suggested that to them

Well, the proof is in the pudding, I shall give this non-transfer way a go and see what happens. Then we will have a definite answer.