Flex Cash ISA withdrawals rule.

soulsaver

My OH has just this year's full ISA contribution in a VM flex cash isa (plus bit of interest).

After seeing others' and personally experiencing their rubbish CS, she plans to vote with her feet.. but she's not confident that VM won't be a problem with a transfer to a new cash isa provider.

I'm ptetty sure that the rule allows a total w/d all this years contribution and put it in a different type of ISA, say, a S&S, but can she just w/d the £20k and put it in another cash ISA , as yet unopened?  And the interest?

AmityNeon

She could withdraw the full balance and close the account (before subscribing to the new cash ISA), but the interest would then lose the ISA wrapper.

eskbanker

The simplest route would be to do the transfer rather than paying into two separate cash ISAs in the same tax year:

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.

although she could potentially do a more complex self-transfer:

https://www.gov.uk/guidance/close-void-or-repair-an-isa-if-youre-an-isa-manager#repair-void

‘Investor error’ ISA self transfer

ISA investors must transfer their ISAs through the you. Investors cannot transfer an ISA by closing it and opening a new ISA with the new ISA manager (commonly known as ‘self-transfer’), even if the investor is moving from one ISA product to another with the same manager.

Self-transfer is not available for Lifetime ISAs.

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• all of the current year subscriptions to the first ISA subscribed to were withdrawn (whether or not that ISA was closed) before subscriptions to the second ISA were made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The first cash ISA may be closed and all the funds held in the ISA withdrawn (including any subscriptions for earlier years) or the first cash ISA may remain open and after the self-transfer will hold only subscriptions which were made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.

See worked examples of repairs and voiding.

AmityNeon

Re: https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#f-isa

The next paragraph is pertinent:

Where a flexible ISA has current year subscriptions only, any withdrawals over and above the amount subscribed – for example, income or capital growth - can only be replaced in that ISA.

soulsaver

@eskbanker Thanks

Just a(nother) thought - she has a II Sipp. 
If she opens an ISA with them, which would cost her nothing and be fairly quick can she legally w/d the full £20k from VM and pay it in to the II Isa?

@AmityNeon Doubt if she'll be too worried about the status of the interest but useful info. avoiding inadvertent rule breaking.

AmityNeon

soulsaver said:

@eskbanker Thanks

Just a(nother) thought - she has a II Sipp. 
If she opens an ISA with them, which would cost her nothing and be fairly quick can she legally w/d the full £20k from VM and pay it in to the II Isa?

Yes she can, and only the interest earned would lose its ISA wrapper (unless it's left in the cash ISA).

eskbanker

soulsaver said:

After seeing others' and personally experiencing their rubbish CS, she plans to vote with her feet.. but she's not confident that VM won't be a problem with a transfer to a new cash isa provider.

But on what basis does she believe that a transfer to another cash ISA provider (who initiates and manages the process) would actually be problematic?  It's beginning to sound like the cure is worse than the disease if she ultimately wants a cash ISA but is contemplating opening a non-cash one just as a stepping stone!

AndyTh_2

soulsaver said:

@eskbanker Thanks

Just a(nother) thought - she has a II Sipp. 
If she opens an ISA with them, which would cost her nothing and be fairly quick can she legally w/d the full £20k from VM and pay it in to the II Isa?

@AmityNeon Doubt if she'll be too worried about the status of the interest but useful info. avoiding inadvertent rule breaking.

If she has the II pension builder plan, then there will be an increased monthly cost for the Investor+SIPP plan needed to switch to.

https://www.ii.co.uk/our-charges

The increased fee is not worth it just cost wise for a £20k balance, compared to % fee brokers, though you do get 1 free trade a month (which the pension builder plan doesn't).

There's a free regular investing option that's still otherwise available on the pension builder plan (a fixed day a month)

35har1old

AmityNeon said:

She could withdraw the full balance and close the account (before subscribing to the new cash ISA), but the interest would then lose the ISA wrapper.

It should be a ISA transfer to a new ISA if you make a withdrawal you won't be able to open another ISA to the new tax year. Choose your ISA  which allows transfers in and when asked how much you are going to subscribe this year the answer should be nil which indicates that you are only making a transfer in

 REF Below was Taken From Gov Website 

Transferring your ISA

You can transfer your Individual Savings Account (ISA) from one provider to another at any time.

You can transfer your savings to a different type of ISA or to the same type of ISA.

If you want to transfer money you’ve invested in an ISA during the current year, you must transfer all of it.

For money you invested in previous years, you can choose to transfer all or part of your savings. 

How to transfer your ISA

To switch providers, contact the ISA provider you want to move to and fill out an ISA transfer form to move your account. If you withdraw the money without doing this, you will not be able to reinvest that part of your tax-free allowance again.

Deadlines and complaints

ISA transfers should take no longer than:

• 15 working days for transfers between cash ISAs
• 30 calendar days for other types of transfer

If your ISA is ‘flexible’, you can take out cash then put it back in during the same tax year without reducing your current year’s allowance. Your provider can tell you if your ISA is flexible.

Example
Your allowance is £20,000 and you put £10,000 into an ISA during the 2022 to 2023 tax year. You then take out £3,000.

The amount you can now put in during the same tax year is:

• £13,000 if your ISA is flexible (the remaining allowance of £10,000 plus the £3,000 you took out)
• £10,000 if your ISA is not flexible (just the remaining allowance)

This applies to the same ISA

When you say VM is that for Virgin Money if so we did have a delay doing a part transfer from Virgin to another provider but it was down to the other provide not entering the right code on the Transfer Request.