Flexible ISA - question on how they work

aaj123

In a flexible ISA, is end of 5th April the only crucial date when the balance in the account needs to reflect what you intend to carry forward?

In other words, only the balance at end of 5th April is what determines whether you left any allowance unutilised and lost forever?

se2020

That's how I understand it.
If you withdraw you need to repay within the same tax year to keep the allowance.
You might want to pay back far enough before the 5th to allow for any issues/lags with the payment getting there..

aaj123

se2020 said:

That's how I understand it.
If you withdraw you need to repay within the same tax year to keep the allowance.
You might want to pay back far enough before the 5th to allow for any issues/lags with the payment getting there..

And what one can withdraw and replace includes even the previous years' ISA balances that one may have transferred in?

sparkiemalarkie

aaj123 said:

se2020 said:

That's how I understand it.
If you withdraw you need to repay within the same tax year to keep the allowance.
You might want to pay back far enough before the 5th to allow for any issues/lags with the payment getting there..

And what one can withdraw and replace includes even the previous years' ISA balances that one may have transferred in?

Yes that's correct

se2020

aaj123 said:

se2020 said:

That's how I understand it.
If you withdraw you need to repay within the same tax year to keep the allowance.
You might want to pay back far enough before the 5th to allow for any issues/lags with the payment getting there..

And what one can withdraw and replace includes even the previous years' ISA balances that one may have transferred in?

Yes.
But it all has to go back in withing the same tax year that it comes out 

So, if you open one now and pay 20k in, then the 7th March (next week) you can withdraw that 20k and put it into a savings account that pays higher interest than the isa.
Before 5th March 2024 pay £40k into the isa (the £20k from your 22-23 allowance plus £20k 23-24 allowance.

Then on the 7th March 2024 you can withdraw £40k, rinse & repeat 

The only real benefit for this is to buildup/keep the tax status of the isa funds if that might be useful to you in the future.

If you want to use the isa like a bank account it's probably not worth the hassle with the transfer times, lack of a debit card and so on..

aaj123

se2020 said:

aaj123 said:

se2020 said:

That's how I understand it.
If you withdraw you need to repay within the same tax year to keep the allowance.
You might want to pay back far enough before the 5th to allow for any issues/lags with the payment getting there..

And what one can withdraw and replace includes even the previous years' ISA balances that one may have transferred in?

Yes.
But it all has to go back in withing the same tax year that it comes out 

So, if you open one now and pay 20k in, then the 7th March (next week) you can withdraw that 20k and put it into a savings account that pays higher interest than the isa.
Before 5th March 2024 pay £40k into the isa (the £20k from your 22-23 allowance plus £20k 23-24 allowance.

Then on the 7th March 2024 you can withdraw £40k, rinse & repeat 

The only real benefit for this is to buildup/keep the tax status of the isa funds if that might be useful to you in the future.

If you want to use the isa like a bank account it's probably not worth the hassle with the transfer times, lack of a debit card and so on..

Did you mean April instead of March everywhere in your post?

se2020

Yes!
Should be April not March!
Don't take financial advice from the Internet

se2020

Also, I've said 5th and 7th.
That's because I'm not actually sure on the exact timings.
Could be midnight on the 5th, 12.01am on the 6th or whatever.

I like to play safe and make transactions at least a week either side of the 6th!

If you are rated chasing just check all the transfer times of each account.
Especially for larger amounts and check if there are any fees. 

se2020

Another way of explaining it:

You are given an isa allowance of £20k per tax year.
To claim this allowance you need to pay money into an isa.
The amount of the allowance you claim is the same as the amount of money paid in.
Once claimed, the allowance is yours for ever.

If you withdraw money then, technically,  you still have the allowance although you gain nothing from it as there is no money gaining interest.

A flexible isa simply let's you pay the money back in again. 
The only condition is, it goes back in within the same tax year that it comes out.

Some of the flexible isa accounts have a limit on how many withdrawals you can make, or what % of the total balance you can withdraw, some may have charges or restrictions on where the funds are withdrawn to.

Expotter

se2020 said:

Another way of explaining it:

You are given an isa allowance of £20k per tax year.
To claim this allowance you need to pay money into an isa.
The amount of the allowance you claim is the same as the amount of money paid in.
Once claimed, the allowance is yours for ever.

If you withdraw money then, technically,  you still have the allowance although you gain nothing from it as there is no money gaining interest.

A flexible isa simply let's you pay the money back in again. 
The only condition is, it goes back in within the same tax year that it comes out.

Some of the flexible isa accounts have a limit on how many withdrawals you can make, or what % of the total balance you can withdraw, some may have charges or restrictions on where the funds are withdrawn to.

When it applies to previous year subscriptions there is one other important rule, it has to be replaced into the same ISA from which it was withdrawn. 

"Replacement of flexible ISA previous year funds must be made to the account from which the withdrawal was made, and in the same tax year.

Where a withdrawal, or internal transfer, closes a flexible ISA no replacement of any previous year funds withdrawn but not replaced in the current year will be possible unless the manager re-opens the ISA"

Effectively it means you can't transfer the ISA until you pay the money back into it, or you'll lose the ability to replace previous years subscriptions that have been withdrawn.