Move non-flexible ISA to flexible ISA?

Cairnpapple

I understand that with a flexible ISA you can take out money from this year and/or previous years, and if you pay it back within the tax year it doesn't affect your allowance. 

Therefore, if I want to 'borrow' money from a non-flexible ISA for a few months (within one tax year) without losing the ISA allowance, can I just transfer the non-flexible ISA to a flexible ISA and take the money out from there? 

I guess a downside would be that the ISA transfer isn't instantaneous so would need some planning.

RG2015

Cairnpapple said:

I understand that with a flexible ISA you can take out money from this year and/or previous years, and if you pay it back within the tax year it doesn't affect your allowance. 

Therefore, if I want to 'borrow' money from a non-flexible ISA for a few months (within one tax year) without losing the ISA allowance, can I just transfer the non-flexible ISA to a flexible ISA and take the money out from there? 

I guess a downside would be that the ISA transfer isn't instantaneous so would need some planning.

Borrow, and for a few months implies that you wish to return it at some point. This would not be possible, as once money is transferred out of a non flexible ISA it cannot be returned.

If you mean retain the ISA tax protection without affecting a subsequent year's allowance then this should be fine as long as the ISA providers allow transfers.

However, once it is in a flexible ISA there are no limitatons on moving money in an out within any tax year.

I transferred an ISA from Virgin Money to Zopa and the transfer was completed in 4 working days.

Cairnpapple

OK so say I have £20k in a non- flexible ISA and I need £10k for 6 months within 1 tax year. 

In the non-flexible ISA I can't pay the money back once I take my money out. 

Therefore I transfer from the non-flexible ISA to a flexible ISA (either transferring the whole ISA or doing a partial transfer if allowed). Takes a few days. 

Once in the flexible ISA I take out the £10k and put it back 6 months later. Allowance kept. 

All good?

RG2015

Your proposal sounds good, but there are ISA rules determined by the Government/Treasury/HMRC and terms and conditions set by individual ISA providers.

As long as you comply with all of these you will be fine.

I have an easy access flexible cash ISA with Virgin Money and I am depositing and withdrawing several times per month.

The balance on 5/4/21 was £xx,xxx. As long as I ensure that balance on 5 April every year is the same my current year's ISA allowance is unaffected.

If you would like a more considered response you will need to provide more details. Banks, dates and accounts but not amounts.

Cairnpapple

Thanks @RG2015, that's very helpful. 

I have previously used a flexible ISA and moved money in and out to fund non-ISA savings accounts with better rates during the year, making sure to fill it up before the end of the tax year. However in 2024/2025 I'll be just over the higher rate tax threshold (and don't have the option of salary sacrifice to reduce) and I already have some fixed rate savers which will use up most of the £500 personal savings allowance in 2024/2025, so there's no obvious advantage in moving other savings outside the ISA.

I was looking at putting £20k in a limited access cash ISA for 2024/2025 and then possibly doing fixed rates for other ISA money. My concern was that most of the best rates seem to be on non-flexible ISAs and I didn't like the idea of losing my ISA allowance if I had to dip into the limited access cash ISA (I wouldn't be anticipating dipping into the fixed rate cash ISAs and know there would be an interest penalty if I did so).

If I have the option of accessing the money in the limited access cash ISA flexibly by taking the extra step of transferring the limited access cash ISA to a flexible easy access or limited access cash ISA, then I'm more comfortable with not having anything in a flexible cash ISA at the start of the year. 

Of course, now I think about it,  a far better way to fund a 10k spend that I know I can pay back within 6 months is a 0% credit card so perhaps this discussion is moot!

edcldn

Hi all. I have a similar question on this topic - hope it’s OK to drag it back up?!

I have a non-flexible ISA in the current tax year. I had to take a lot of the money out for something and so there is not much left in there and as it’s not flexible I can’t top it up much again either.

If I transfer my current balance to a provider which offers a flexible ISA, can I add more money back in to the ISA than I can now?

Thanks

Qyburn

RG2015 said:

The balance on 5/4/21 was £xx,xxx. As long as I ensure that balance on 5 April every year is the same my current year's ISA allowance is unaffected.

Are you accounting for interest? I would have thought the issue would be whether withdrawals were matched by later deposits. 

slinger2

If you move it to a flexible ISA you will be able to withdraw anything that's left and replace it in the same tax year. You can't replace the money you withdrew from the non-flexi ISA. Putting that money in the new flexi ISA would count as part of your £20k allowance.

edcldn

slinger2 said:

If you move it to a flexible ISA you will be able to withdraw anything that's left and replace it in the same tax year. You can't replace the money you withdrew from the non-flexi ISA. Putting that money in the new flexi ISA would count as part of your £20k allowance.

Ok thanks - I feared as much!