How do Flexible (Easy Access) ISA's work with the New Rules (24/25) ?

A16XJD

I appreciate that Easy Access Flexible ISA's have previously given you the opportunity to:

• Add in cash (into Easy Access Flexible) up to the ISA limit (£20k)
• Take it all out again
• Add back in (same account) within the same Tax Year (up to £20k)

My question is, now that you can subscribe to multiple cash ISA's in the same year. Does that flexibility extend to another ISA (eg fixed) once removed. Or does the money specifically have to go back into the original flexible ISA? eg can i do the below?

• Add in cash (into Easy Access Flexible) up to the ISA limit (£20k)
• Take it all out again
• Later in same tax year, put £20k cash into a different, fixed cash-ISA

Do both accounts have to be 'flexible' to allow this?

Thanks

eskbanker

New guidance from 2024/25:

Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA.

Old guidance up to 2023/24:

Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule.

https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#flexible-isas

slinger2

The first ISA needs to be flexible. You could replace the money into any ISA, flexible or not. If the second ISA was not flexible you wouldn't be able to repeat the trick again, although you could still do a transfer to another provider.

where_are_we

From above www.gov.uk link -

"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."

My OH opened a flexible cash ISA (no new money) funded by transfer from another ISA provider and all was completed in 23-24. A withdrawal was made this tax year 24-25. Am I correct that replacement of these withdrawn funds must be made to THIS ISA in 24-25 and that this replacement will not count towards OH`s £20K  24-25 ISA allowance?

Then withdrawal of new cash ISA money deposited this tax year 24-25 in a flexible ISA can be replaced in ANY current year ISA. If this is another flexible ISA then you could do the same again.

From above www.gov.uk link - "Flexible ISA withdrawals are deemed to be firstly of current year subscriptions, and secondly of previous year funds. Replacements are deemed to be firstly of previous year funds, and secondly of current year subscriptions."

Obviously one has got to keep a record of all these potential transactions.

Lets hope financial institutions and HMRC agree with your records!

masonic

where_are_we said:

From above www.gov.uk link -

"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."

My OH opened a flexible cash ISA (no new money) funded by transfer from another ISA provider and all was completed in 23-24. A withdrawal was made this tax year 24-25. Am I correct that replacement of these withdrawn funds must be made to THIS ISA in 24-25 and that this replacement will not count towards OH`s £20K  24-25 ISA allowance?

Then withdrawal of new cash ISA money deposited this tax year 24-25 in a flexible ISA can be replaced in ANY current year ISA. If this is another flexible ISA then you could do the same again.

From above www.gov.uk link - "Flexible ISA withdrawals are deemed to be firstly of current year subscriptions, and secondly of previous year funds. Replacements are deemed to be firstly of previous year funds, and secondly of current year subscriptions."

Obviously one has got to keep a record of all these potential transactions.

Lets hope financial institutions and HMRC agree with your records!

Something is not quite right here, as there would have to be no current year subscriptions in the ISA for the withdrawal mentioned to be of prior year money. Flexible withdrawals must first come from current year subscriptions (if any), then prior year contributions. You can never hold current year subscriptions in a flexible ISA from which prior year funds have been flexibly withdrawn. Any payment into the ISA will be treated as replacement subscriptions until the prior year money has been fully replaced. This means that the provider can track it by allowing their record of your annual allowance go above £20k, which they normally make available so that the customer can check. When the allowance is >£20k, then the next £ added will be a replacement subscription. At £20k, the account holder starts to subscribe their current year allowance. When the provider submits their annual returns, they just provide the net subscription figure subject to a minimum of £0 (negative subscriptions cannot be carried). Simples.

If one only holds prior year funds and wishes not to subscribe to the flexible ISA, then they need to ensure the account is showing exactly £20k at the end of the tax year. Or £0 if they wish to use their full allowance in one ISA. If they want to subscribe to multiple ISAs, then they will need to ensure they all add up to no more than £20k net subscriptions, just as they would if not using ISA flexibility. This is the complicated bit.

slinger2

masonic said:

where_are_we said:

From above www.gov.uk link -

"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."

My OH opened a flexible cash ISA (no new money) funded by transfer from another ISA provider and all was completed in 23-24. A withdrawal was made this tax year 24-25. Am I correct that replacement of these withdrawn funds must be made to THIS ISA in 24-25 and that this replacement will not count towards OH`s £20K  24-25 ISA allowance?

Then withdrawal of new cash ISA money deposited this tax year 24-25 in a flexible ISA can be replaced in ANY current year ISA. If this is another flexible ISA then you could do the same again.

From above www.gov.uk link - "Flexible ISA withdrawals are deemed to be firstly of current year subscriptions, and secondly of previous year funds. Replacements are deemed to be firstly of previous year funds, and secondly of current year subscriptions."

Obviously one has got to keep a record of all these potential transactions.

Lets hope financial institutions and HMRC agree with your records!

Something is not quite right here, as there would have to be no current year subscriptions in the ISA for the withdrawal mentioned to be of prior year money. Flexible withdrawals must first come from current year subscriptions (if any), then prior year contributions. You can never hold current year subscriptions in a flexible ISA from which prior year funds have been flexibly withdrawn. Any payment into the ISA will be treated as replacement subscriptions until the prior year money has been fully replaced. This means that the provider can track it by allowing their record of your annual allowance go above £20k, which they normally make available so that the customer can check. When the allowance is >£20k, then the next £ added will be a replacement subscription. At £20k, the account holder starts to subscribe their current year allowance. When the provider submits their annual returns, they just provide the net subscription figure subject to a minimum of £0 (negative subscriptions cannot be carried). Simples.

If one only holds prior year funds and wishes not to subscribe to the flexible ISA, then they need to ensure the account is showing exactly £20k at the end of the tax year. Or £0 if they wish to use their full allowance in one ISA. If they want to subscribe to multiple ISAs, then they will need to ensure they all add up to no more than £20k net subscriptions, just as they would if not using ISA flexibility. This is the complicated bit.

I think it's a bit unclear whether the poster was referring to the same Cash ISA (in the bolded paragraphs) or two separate ones. If they're the same one then, as you say, you can't withdraw £10k of old money and then subscribe £5k of new money, since the system deems that the £5k is old money. Of course, if they're different ISAs then that would be possible.

A16XJD

Just to confirm, everything i'm talking about here would be new 24/25 subscription money & all the withdrawals/re-deposits would also be within 24/25

In this instance, do i take it that the consensus is that this is fine & the 'same' money can be deposited into a fixed-rate ISA later in the year ?

slinger2

A16XJD said:

Just to confirm, everything i'm talking about here would be new 24/25 subscription money & all the withdrawals/re-deposits would also be within 24/25

In this instance, do i take it that the consensus is that this is fine & the 'same' money can be deposited into a fixed-rate ISA later in the year ?

That is the case. You can fund a flexible cash ISA, withdraw the money and then put that money into a fixed-rate ISA (which probably wouldn't be flexible) as long as it's all done in the same tax year.

Note that if you withdrew the interest you got in the first account that couldn't be included, it could only go back where it came from.

Of course, you could simply do a "transfer" directly from one to the other, as long as the new provider allows transfers in. In that case the whole lot could be moved, even if it was more than £20k. The first ISA wouldn't need to be flexible.

masonic

@A16XJD @where_are_we unfortunately HMRC has updated its guidance as of 30th April and no longer permits any flexibly withdrawn subscriptions to be replaced in a different ISA than the one it was taken from. To do as you wish would now replacement of the subscriptions to the original ISA, then a transfer to the new one.

James-H_4

I’m so confused by this. I have two flexible Cash ISAs, both set up this tax year. I have already deposited and withdrawn from both of them. Have I broken the rules?

First I withdrew everything from the first and put it into the second, then I withdrew a bit from the second with the intention of replacing it.

If the rule is that you should replace withdrawn funds into the same flexible ISA, does that essentially disable the flexibility of any other flexible ISAs you may have?

This, and the new same-type ISA rules seem incompatible. Or am I just being dumb here? 

slinger2

There's no problem withdrawing from a flexi Cash ISA. However the new rule is that you must replace this in the ISA it came from. Moving the money to another ISA now means that you're using up more of your £20k allowance. If you've gone over the £20k then you have broken the rules.

Flexi ISAs are less useful now, but they still offer the possibility of withdrawing and replacing in the same tax year without using up your allowance, something that's not possible for non-flexible ISAs.