Flexible Cash ISA and S&S ISA rules

Albermarle

You can open as many cash ISA's as you like, and transfer money from one to another with no limits, but you can only contribute new money to one cash ISA each year. 

cricidmuslibale

Rhcichrrds said:

Albermarle said:

Rhcichrrds said:

 I have an old ISA earning 0.1% and want to temporarily transfer it to Principality's Online cash ISA 2.5% (leaving it there until fixed rate ISA interest go higher). If I transfer the ISA, leave it in Principality for two  months and, then transfer it out to a fixed rate ISA with another bank, do I still get two months interest with Principality at 2.5%.  I ask because even though it is not a fixed rate ISA it says interest is paid is paid yearly, each year on 6th April.

If you transfer out from it, it will pay interest up to the day of the transfer.

until fixed rate ISA interest go higher).

You might have a long wait, in fact the best rates have largely been pulled. You may want to read this thread.

Are savings rates on their way down? — MoneySavingExpert Forum

One last question, they mention only one cash ISA can be opened. Am I  allowed to transfer another previous ISA again in to another separate  Principality 2.5% cash ISA (ending up with two Principalty Cash ISAs).

Yes, you are allowed to transfer another previous ISA into a separate cash ISA (in this case with Principality) as long as you do not deposit any new money (money from a non ISA source that’s deposited into an ISA this tax year) into more than one cash ISA during this tax year.

AlwaysLearnin

jimjames said:

AlwaysLearnin said:

Are you asking if you can in effect put £19999 in your s&s ISA and £20k in a flexible cash ISA in the same tax year (all being 'new ISA money') as long as you take £19999 out from the the cash ISA before the end of the tax year?  If so, nice idea, however I don't think it works like that (i.e. the £20k max total annual allowance still applies across all ISA types)

Yes that was the question, apologies if it wasn't clear. It seems from the link above that it is possible as the total allowance is still only £20k for the year, it's just above that for part of the year which in the example above would be 360 or so days.

Hmmm, although you might technically be able to do it, and possibly fly under the radar if you get your timings right, I'm not sure I'd take the chance with HMRC myself...

cricidmuslibale

AlwaysLearnin said:

jimjames said:

AlwaysLearnin said:

Are you asking if you can in effect put £19999 in your s&s ISA and £20k in a flexible cash ISA in the same tax year (all being 'new ISA money') as long as you take £19999 out from the the cash ISA before the end of the tax year?  If so, nice idea, however I don't think it works like that (i.e. the £20k max total annual allowance still applies across all ISA types)

Yes that was the question, apologies if it wasn't clear. It seems from the link above that it is possible as the total allowance is still only £20k for the year, it's just above that for part of the year which in the example above would be 360 or so days.

Hmmm, although you might technically be able to do it, and possibly fly under the radar if you get your timings right, I'm not sure I'd take the chance with HMRC myself...

I fully agree with this! If you are fortunate enough to have a £40,000 lump sum available to deposit in a cash ISA or two, probably the best way to do so entirely legitimately is to wait until near the end of the current financial (tax) year to make a 1st deposit of £20,000 and then at the start of the next financial year, make a 2nd deposit of £20,000.

This has the benefit of almost depositing £40,000 in one go - the two deposits literally being within a few days of each other - which helps to maximise the interest earned on that £40,000 in a similar way to depositing a much smaller amount into a regular savings account at the end of one calendar month and immediately following it with a 2nd deposit at the start of the next month!

jimjames

cricidmuslibale said:

AlwaysLearnin said:

jimjames said:

AlwaysLearnin said:

Are you asking if you can in effect put £19999 in your s&s ISA and £20k in a flexible cash ISA in the same tax year (all being 'new ISA money') as long as you take £19999 out from the the cash ISA before the end of the tax year?  If so, nice idea, however I don't think it works like that (i.e. the £20k max total annual allowance still applies across all ISA types)

Yes that was the question, apologies if it wasn't clear. It seems from the link above that it is possible as the total allowance is still only £20k for the year, it's just above that for part of the year which in the example above would be 360 or so days.

Hmmm, although you might technically be able to do it, and possibly fly under the radar if you get your timings right, I'm not sure I'd take the chance with HMRC myself...

I fully agree with this! If you are fortunate enough to have a £40,000 lump sum available to deposit in a cash ISA or two, probably the best way to do so entirely legitimately is to wait until near the end of the current financial (tax) year to make a 1st deposit of £20,000 and then at the start of the next financial year, make a 2nd deposit of £20,000.

The problem is that I don't want to deposit £40k in a cash ISA. My ISA limit is primarily used up by S&S ISA so the cash is a new thing for my emergency fund and now that rates are rising might be liable to tax. The example I gave above was showing the extremes but if at the start of the year I put £20k in a flexible cash ISA the rules appear to be that I could remove that money as my S&S ISA filled during the year - I only pay in monthly from salary and as long as the total was £20k in both ISAs by the end of the financial year it would be within the rules. Even if the £20k was only removed from the cash ISA at the start of April it would still be within the rules as long as the total in both ISAs was £20k or less by the end of tax year. It would be moved to a savings account temporarily and then back into the cash ISA at the start of the next tax year.

AlwaysLearnin said:

jimjames said:

AlwaysLearnin said:

Are you asking if you can in effect put £19999 in your s&s ISA and £20k in a flexible cash ISA in the same tax year (all being 'new ISA money') as long as you take £19999 out from the the cash ISA before the end of the tax year?  If so, nice idea, however I don't think it works like that (i.e. the £20k max total annual allowance still applies across all ISA types)

Yes that was the question, apologies if it wasn't clear. It seems from the link above that it is possible as the total allowance is still only £20k for the year, it's just above that for part of the year which in the example above would be 360 or so days.

Hmmm, although you might technically be able to do it, and possibly fly under the radar if you get your timings right, I'm not sure I'd take the chance with HMRC myself...

That's the question really, it doesn't seem to be "flying under the radar or technically possible", it's entirely permitted within the rules from what has been posted.

masonic

jimjames said:

AlwaysLearnin said:

jimjames said:

AlwaysLearnin said:

Are you asking if you can in effect put £19999 in your s&s ISA and £20k in a flexible cash ISA in the same tax year (all being 'new ISA money') as long as you take £19999 out from the the cash ISA before the end of the tax year?  If so, nice idea, however I don't think it works like that (i.e. the £20k max total annual allowance still applies across all ISA types)

Yes that was the question, apologies if it wasn't clear. It seems from the link above that it is possible as the total allowance is still only £20k for the year, it's just above that for part of the year which in the example above would be 360 or so days.

Hmmm, although you might technically be able to do it, and possibly fly under the radar if you get your timings right, I'm not sure I'd take the chance with HMRC myself...

That's the question really, it doesn't seem to be "flying under the radar or technically possible", it's entirely permitted within the rules from what has been posted.

Not from my reading of ISA Regulations, reg 4, paragraph (1B) part (e). You would also be required to make an ISA declaration stating:

"‘I declare that all subscriptions made, and to be made, belong to me. I am 16 years of age or over. I have not subscribed/made payments, and will not subscribe/make payments more than the overall subscription/payment limit in total to a cash ISA, a stocks and shares ISA, an innovative finance ISA, and a Lifetime ISA in the same tax year."

I can't see that the above can be reasonably interpreted in any way other than you cannot exceed the annual allowance at any time during the tax year. To do so would be a breach of the ISA regulations and your declaration, however unlikely it is you would be caught. In the vast majority of instances where HMRC catches people breaching this regulation, it is a genuine error and the individual is let off with a warning for the first offence. A pattern of repeatedly oversubscribing and then bringing your subscriptions within the allowance through flexible withdrawals would be a lot more difficult to explain away as a genuine error. So it is very much a case of flying under the radar using technical knowledge of the checks that are performed to avoid getting caught, in my view.

zebb

Further to earlier responses on Flexible Cash ISAs, can I please ask. If I've deposited say £5000 into a flexible ISA and then I withdraw it all, can I then I apply for a different Cash ISA with a different provider that same year. I'm aware I could transfer it but I'm thinking it would be quicker and easier to open and deposit in a new one rather than go through the hassle of transferring it.

From what I can gather from earlier responses, the amount in the first ISA would be zero at the end of the year so would not be reported to HMRC.

So would I be breaking any rules?

Any advice appreciated, Zebb

Reed_Richards

It's against the rules to open more than one cash ISA in any one tax year.  You might get away with what you plan but if you are found out you are liable to be told that the second ISA is invalid, in which case you have wasted your ISA allowance for the year. 

isasmurf

zebb said:

Further to earlier responses on Flexible Cash ISAs, can I please ask. If I've deposited say £5000 into a flexible ISA and then I withdraw it all, can I then I apply for a different Cash ISA with a different provider that same year. I'm aware I could transfer it but I'm thinking it would be quicker and easier to open and deposit in a new one rather than go through the hassle of transferring it.

From what I can gather from earlier responses, the amount in the first ISA would be zero at the end of the year so would not be reported to HMRC.

So would I be breaking any rules?

Any advice appreciated, Zebb

The account would be reported as a current year ISA with nil subscriptions as they need to report the date of the first subscription. 

However, what you are asking is allowed once under different rules.  If you withdraw all current year deposits from any ISA (whether or not it is flexible, except Lifetime ISAs) before putting them in a different ISA then the first time you do this in a tax year it will be allowed under "investor error - self transfer" rules. If you do it again in the same tax year it won't be valid.

HMRC guidance to ISA managers
However, where:

• the investor subscribes to 2 cash ISAs, in the same tax year
• subscriptions to the first ISA subscribed to were valid
• all of the current year subscriptions to the first ISA subscribed to were withdrawn (whether or not that ISA was closed) before subscriptions to the second ISA were made

The subscriptions to the second ISA may be valid, subject to the guidance below.

The first cash ISA to be self-transferred in a tax year is valid, and does not need to be repaired.

The second (and any subsequent) self-transferred cash ISA is not valid and is not eligible for repair.

The first cash ISA may be closed and all the funds held in the ISA withdrawn (including any subscriptions for earlier years) or the first cash ISA may remain open and after the self-transfer will hold only subscriptions which were made in previous years. If the ISA remains open, no further subscriptions can be made to it in the tax year of the self-transfer.

zebb

isasmurf said:

HMRC guidance to ISA managers

However, where:

• the investor subscribes to 2 cash ISAs, in the same tax year
• subscriptions to the first ISA subscribed to were valid
• all of the current year subscriptions to the first ISA subscribed to were withdrawn (whether or not that ISA was closed) before subscriptions to the second ISA were made

The subscriptions to the second ISA may be valid, subject to the guidance below.

The first cash ISA to be self-transferred in a tax year is valid, and does not need to be repaired.

The second (and any subsequent) self-transferred cash ISA is not valid and is not eligible for repair.

The first cash ISA may be closed and all the funds held in the ISA withdrawn (including any subscriptions for earlier years) or the first cash ISA may remain open and after the self-transfer will hold only subscriptions which were made in previous years. If the ISA remains open, no further subscriptions can be made to it in the tax year of the self-transfer.

Excellent. Many thanks for that isasmurf. When I rang Virgin this afternoon, before knowing the above, they said (If I didnt want to go through the transfer route) that I could cancel as I was still within the 14 day cooling off period. But. I would have had to write in to do so.  With Christmas, the post strikes and their 5 working day minimum process time,  that of course could have ended up being even longer than the 4 weeks I've currently been waiting for another provider to transfer one of my ISAs. So, I will follow the HRMC guidance, withdraw all the funds  - and leave it open for the present with no cash in it - and invest forthwith in the second cash ISA. Much less hassle.

Once again, many, many thanks,
Zebb