ISA Flexibility Question

chutuk

Hi all,

Got a couple of questions regarding ISA's I hope you can help with.

I have an existing Fixed rate Cash ISA with Virgin Money that has a maturity date of October 2024.  If I open a flexible easy-access cash ISA in April 2024 and pay into this, it's my understanding I won't be able to pay into the fixed ISA when it matures, is this correct?  Or would flexibility allow me to withdraw 100% from the easy access and place it in the fixed after maturity? 

Secondly, if I open the flexible cash ISA in April, what options do have with the fixed ISA at maturity if I don't want to transfer the money out?  Would i be able to renew for another fixed term or would this be counted as opening two ISAs within the same tax year?

Thanks for any info

Andy

eskbanker

chutuk said:

I have an existing Fixed rate Cash ISA with Virgin Money that has a maturity date of October 2025.  If I open a flexible easy-access cash ISA in April 2025 and pay into this, it's my understanding I won't be able to pay into the fixed ISA when it matures, is this correct?  Or would flexibility allow me to withdraw 100% from the easy access and place it in the fixed after maturity?

After 6 April 2024, the restrictions are lifted, allowing you to pay new money into as many ISAs as you like, obviously subject to the individual product terms and the overall £20K limit.

chutuk said:

Secondly, if I open the flexible cash ISA in April, what options do have with the fixed ISA at maturity if I don't want to transfer the money out?  Would i be able to renew for another fixed term or would this be counted as opening two ISAs within the same tax year?

As above, the latter is no longer an issue, but transferring ISAs doesn't affect your annual contribution allowance so will generally make more sense.

chutuk

Brill, thanks for that.

So just to clarify, I'm free to invest £20k in one, or across multiple cash isas throughout the 24/25 tax year (subject to product rules) AND I can re-subscribe to a new fixed term on my existing fixed ISA should I wish to in October without breaking any rules. 

I assume ISA flexibility will exist between banks.  For example I could deposit £10k into Natiowide on April 6th, then on say August 1st I could withdraw £5k from Nationwide and add this to another £10k and deposit £15k in Santander.   As long as you don't exceed the overall £20k in the tax year then you're golden? 

badger09

chutuk said:

Brill, thanks for that.

So just to clarify, I'm free to invest £20k in one, or across multiple cash isas throughout the 24/25 tax year (subject to product rules) AND I can re-subscribe to a new fixed term on my existing fixed ISA should I wish to in October without breaking any rules. 

BIB ‘Subscribe’, in ISA terms means pay new money into. What you would be allowed to do when your ISA matures in October 25, is open a new ISA and ask the new provider to arrange transfer of your matured ISA.  

chutuk said:

I assume ISA flexibility will exist between banks.  For example I could deposit £10k into Natiowide on April 6th, then on say August 1st I could withdraw £5k from Nationwide and add this to another £10k and deposit £15k in Santander.   As long as you don't exceed the overall £20k in the tax year then you're golden? 

BIB I would not assume that. Currently a flexible ISA allows you to withdraw & replace money into the same ISA in the same tax year without affecting your ISA allowance. I have not read any detail but can envisage a nightmare of admin if flexibility were to be extended across banks. 

elkiedee

I would think you would still need to apply to transfer money between ISAs/banks, rather than withdrawing from Nationwide and paying into Santander. The change in ISA rules might make partial transfers of current tax year ISA money possible, but providers will presumably still decide whether they want to offer maximum flexibility under the changed rules. So for the example of moving part of a Nationwide ISA to Santander, this will presumably be a decision for Santander on your chosen account. 

chutuk

badger09 said:

BIB ‘Subscribe’, in ISA terms means pay new money into. What you would be allowed to do when your ISA matures in October 25, is open a new ISA and ask the new provider to arrange transfer of your matured ISA.  

BIB I would not assume that. Currently a flexible ISA allows you to withdraw & replace money into the same ISA in the same tax year without affecting your ISA allowance. I have not read any detail but can envisage a nightmare of admin if flexibility were to be extended across banks. 

Ah.. ok. To maybe explain better.  What I want to do is transfer money from a taxable savings account into an easy access ISA in April once the new tax year starts.  I want this to be flexible as I may need to make withdrawals from this account as and when things happen.   The money in my existing, fixed term cash ISA I don't envisage needing access to in the next 12 months. So, when this account matures, if the interest rates remain competitive and I don't want to switch banks, would I be able to fix for another 12month period having already used my £20k allowance for the year.   I wouldn't add any more money to this account, but would just want to lock in a good interest rate for another year. 

That's interesting thanks, can see the industry very swiftly moving to a system where the accounts with the best interest rates do not allow ISA transfers.

masonic

chutuk said:

badger09 said:

BIB ‘Subscribe’, in ISA terms means pay new money into. What you would be allowed to do when your ISA matures in October 25, is open a new ISA and ask the new provider to arrange transfer of your matured ISA.  

BIB I would not assume that. Currently a flexible ISA allows you to withdraw & replace money into the same ISA in the same tax year without affecting your ISA allowance. I have not read any detail but can envisage a nightmare of admin if flexibility were to be extended across banks. 

Ah.. ok. To maybe explain better.  What I want to do is transfer money from a taxable savings account into an easy access ISA in April once the new tax year starts.  I want this to be flexible as I may need to make withdrawals from this account as and when things happen.   The money in my existing, fixed term cash ISA I don't envisage needing access to in the next 12 months. So, when this account matures, if the interest rates remain competitive and I don't want to switch banks, would I be able to fix for another 12month period having already used my £20k allowance for the year.   I wouldn't add any more money to this account, but would just want to lock in a good interest rate for another year. 

That's interesting thanks, can see the industry very swiftly moving to a system where the accounts with the best interest rates do not allow ISA transfers.

You have always been able to move your previous year ISAs around at will (using the ISA transfer system or internally if carried out by the bank) without any impact on your annual allowance, and this will not change in April.