Status of payment back into an old flexi S&S ISA of withdrawn funds

TheGrumpyD

Clearly this doesn’t count to the annual allowance in the year of withdrawal as regards how much you can contribute in any year. But does it count for the “only one S&S ISA per year” rule if you want to put it back and you’ve already paid into a different S&S ISA from a a different institution in that same year?

if anyone is interested to know the detail behind the query, thank you and here it is I hope it’s clear and sorry for length (don’t think it alters things from one liner above…) :-

In my case, an old, flexi S&S ISA had a chunk in from past tax years. No contribution was made into it this tax year. 

In May 2023 I put £400 into a S&S ISA with another provider (the “latest ISA”) which I’d opened the previous tax year.  (No contributions made to that aforementioned old flexi S&S ISA that year either, so no problem.)

 In June 2023 I needed cash and so withdrew a chunk from the old flexi S&S ISA. I can now put it back and want to do that before this tax year ends, and can use the rest of this year’s allowance too (£19,600).

I am clear that the £19,600 remaining from this year’s allowance, if I choose to invest it in my S&S ISAs, has to go into the latest ISA as I’ve paid into it this year already, not the old flexi one. No problem.

But…whilst the provider of the old flexi S&S ISA is clear with me (two phone calls to check) that the amount is fine to go back in AS FAR AS the allowance per year is concerned, because it’s on top of it, which is beyond doubt, their position appears to be it’s up to me in the first place to be sure I’m within the rules otherwise on investing in different types per year before I try and put it back in.

HMRC have been perfectly good with me on two calls to discuss the precise point (they went away to think too) but pretty much have said it’s up to the people at the financial provider and their HMRC contact, how it’s reported after the event and whether it’s compliant.

Have searched HMRC guidance and other online sources and haven’t found a definitive answer.  HMRC Guidance to ISA Managers in 2018, which is still in force, indicates it’s OK but only by implication; it is a reference  to “same year” contributions and states expressly that they cannot break the “one S&S ISA only per year” rule. Sure. There is an oblique reference to how payment counts for the “one only” rule if they’re withdrawals planned to go back in,  in a 2016 note from them, which indicates rules may change on multiISAs - which I believe come in next year. That’s it though: their Community Forum also doesn’t address it directly.

So, I’m posting in case anyone has discussed the point with HMRC already or otherwise knows how they’ll treat it. Any help please? It seems to me such an obvious question as it’s fundamental to the status of withdrawals - do they count in amount per the annual allowance  (NO) and do they count as “payments/contributions/investments” for the “can’t put into two S&S per year” rule? Surely they should not count as payments in, as they completely in a silo and especially as they’re old money. 

Thanks for reading and any help.

eskbanker

I'm not sure I'm following what the issue is - your replacement of prior year money back into the same flexible ISA that it came from isn't affected in any way by the current year allowance, as you can withdraw (and redeposit) many multiples of £20K from a flexible ISA with prior year money.

TheGrumpyD

Yes, eskbanker, thanks for replying, you’re absolutely right, it’s not. But is it affected by the “only one S&S ISA can be paid into per year” rule. It’s a different point entirely. Not sure I can be clearer sorry… your answer assumes the redeposit, at a time when I’ve already funded another S&S ISA in the same year, doesn’t break the “one only” rule. I agree it shouldn’t, but it’s an assumption only isn’t it? Rules don’t cover it expressly so far as I can see? See the HMRC guidance notes I cited. Love to be corrected though. Thx

eskbanker

The 'one ISA of each type per tax year' rule only applies to current year deposits of new money, not replacements of prior year money back into flexible ISAs.

etienneg

TheGrumpyD said:

But is it affected by the “only one S&S ISA can be paid into per year” rule. 

I would be very interested to read any law, regulation, terms and conditions, etc. that (literally) say “only one ISA can be paid into per year”. I don't know of any! This sounds like a paraphrase, and unfortunately a rather poor one. If you look carefully, what you will see in official sources is "you can only subscribe to one ISA...". When you read this, you should be careful to make sure you understand what the word "subscribe" means in this context, which is "pay NEW money into". Far too often, people get confused simply because they don't read, or quote, what is actually written.

So, to be clear, withdrawing money from a flexible ISA and replacing it in the same tax year (that is, paying it back into the SAME ISA) does not count as subscribing, so can be done as well as paying new money into an ISA (the same one, or a different one) in that tax year.

TheGrumpyD

Etienneg, thank you for confirming that my interpretation is correct; I’m glad that you were able to get there through the paraphrase. Go well