Flexible ISA - rules about treatment of old money vs current year money

aaj123

So if I open a new flexible ISA and transfer in previous year's ISA money and if I have already funded another ISA account with current year money then would it be me who has to be careful to not exceed the balance (beyond what came in as transfer) in the flexible ISA (seeing that its not allowed to have current year ISA money in multiple accounts)?

Also, if I make a withdrawal from the new flexible ISA (funded like above) and then deposit into it, then the provider would treat that as a replacement of old year money rather than a contribution in the current year?

eskbanker

aaj123 said:

So if I open a new flexible ISA and transfer in previous year's ISA money and if I have already funded another ISA account with current year money then would it be me who has to be careful to not exceed the balance (beyond what came in as transfer) in the flexible ISA (seeing that its not allowed to have current year ISA money in multiple accounts)?

If you're talking about redepositing after a withdrawal then yes, you'd always need to ensure that you don't pay in too much so that it became current year money.

aaj123 said:

Also, if I make a withdrawal from the new flexible ISA (funded like above) and then deposit into it, then the provider would treat that as a replacement of old year money rather than a contribution in the current year?

Yes, if it only holds prior year money, then replenishing this after withdrawal doesn't change that, unless you pay in more than you withdrew (as above).

aaj123

eskbanker said:

aaj123 said:

So if I open a new flexible ISA and transfer in previous year's ISA money and if I have already funded another ISA account with current year money then would it be me who has to be careful to not exceed the balance (beyond what came in as transfer) in the flexible ISA (seeing that its not allowed to have current year ISA money in multiple accounts)?

If you're talking about redepositing after a withdrawal then yes, you'd always need to ensure that you don't pay in too much so that it became current year money.

aaj123 said:

Also, if I make a withdrawal from the new flexible ISA (funded like above) and then deposit into it, then the provider would treat that as a replacement of old year money rather than a contribution in the current year?

Yes, if it only holds prior year money, then replenishing this after withdrawal doesn't change that, unless you pay in more than you withdrew (as above).

Makes sense. I wonder why banks don't typically provide a useful tool in these accounts to help people figure out how much they can deposit without crossing an annual allowance limit. I mean they do this for the max limit that includes current year allowance but I haven't seen similar to help with previous year balances. 

eskbanker

aaj123 said:
Makes sense. I wonder why banks don't typically provide a useful tool in these accounts to help people figure out how much they can deposit without crossing an annual allowance limit. I mean they do this for the max limit that includes current year allowance but I haven't seen similar to help with previous year balances. 

There's no joined-up ISA limit reporting across banks, so if you've already used your current year allowance elsewhere and then open another ISA to hold prior year money, that second one will typically report your remaining allowance as £20K, so anyone using multiple ISAs has to take responsibility for keeping on top of things rather than expecting the providers to do it for them!

If you start your flexible ISA and it (falsely) says you have £20K remaining, then you can simply keep an eye on this figure throughout subsequent withdrawals and replenishments, ensuring that it doesn't drop below that initial value, or if you find this challenging then you might find it easier to use the flexible ISA for current year money and an inflexible one for prior year money?

masonic

aaj123 said:

eskbanker said:

aaj123 said:

So if I open a new flexible ISA and transfer in previous year's ISA money and if I have already funded another ISA account with current year money then would it be me who has to be careful to not exceed the balance (beyond what came in as transfer) in the flexible ISA (seeing that its not allowed to have current year ISA money in multiple accounts)?

If you're talking about redepositing after a withdrawal then yes, you'd always need to ensure that you don't pay in too much so that it became current year money.

aaj123 said:

Also, if I make a withdrawal from the new flexible ISA (funded like above) and then deposit into it, then the provider would treat that as a replacement of old year money rather than a contribution in the current year?

Yes, if it only holds prior year money, then replenishing this after withdrawal doesn't change that, unless you pay in more than you withdrew (as above).

Makes sense. I wonder why banks don't typically provide a useful tool in these accounts to help people figure out how much they can deposit without crossing an annual allowance limit. I mean they do this for the max limit that includes current year allowance but I haven't seen similar to help with previous year balances. 

Most do - they show you how much of your annual allowance is remaining. It needs to be maintained at a minimum of £20,000 if you do not wish to subscribe to the ISA in the current tax year.

aaj123

eskbanker said:

aaj123 said:
Makes sense. I wonder why banks don't typically provide a useful tool in these accounts to help people figure out how much they can deposit without crossing an annual allowance limit. I mean they do this for the max limit that includes current year allowance but I haven't seen similar to help with previous year balances. 

There's no joined-up ISA limit reporting across banks, so if you've already used your current year allowance elsewhere and then open another ISA to hold prior year money, that second one will typically report your remaining allowance as £20K, so anyone using multiple ISAs has to take responsibility for keeping on top of things rather than expecting the providers to do it for them!

If you start your flexible ISA and it (falsely) says you have £20K remaining, then you can simply keep an eye on this figure throughout subsequent withdrawals and replenishments, ensuring that it doesn't drop below that initial value, or if you find this challenging then you might find it easier to use the flexible ISA for current year money and an inflexible one for prior year money?

Ah indeed. Your last para does give a simple and useful way to handle the goal of staying within previous year allowances.