Chip flexible isa

Spoton00

Hi everyone. I have a Chip flexible isa which I opened last year. I had £17000 in it from the last tax year. I have recently opened a Trading 212 flexible isa this year. I plan to withdraw the most of the funds from the Chip isa and deposit them in the 212 isa, manually not through isa transfer. Obviously because 212 has better interest rates than chip. My intention is to hopefully fund the 212 isa with £20000 before April and also return the £17000 back  into the Chip isa before April 5th as well, maxing out my tax free allowance. I have read on HMRC that this is possible. Has anyone have any different views on what I propose?

eskbanker

If you withdraw £17K from Chip and pay it into T212 (other than via direct ISA transfer) then that uses £17K of your current tax year allowance, so you could only pay another £3K of new money into T212 until the start of 2025/26.

slinger2

Don't see how this maxes out your allowance. To max it out you need to end the tax year with £37k in ISAs. However the £17k you plan to pay into T212 will count towards your £20k allowance, leaving you with £3k left. If you return the £17k back to Chip I can't see how you end up with £37k total.

boingy

Use an ISA transfer to get it to T212 then before April you can put another 20K into it if you want. If you withdraw it and pay it into T212 you can only add 3k of "new" money this tax year to any ISA.

Spoton00

Going by HMRC guidance I can fund my trading 212 isa with the full £20000 this year and also return the £17000 back into my Chip isa which I withdrew earlier in the year. It’s been discussed on here before I see.

eskbanker

Spoton00 said:

Going by HMRC guidance I can fund my trading 212 isa with the full £20000 this year and also return the £17000 back into my Chip isa which I withdrew earlier in the year. It’s been discussed on here before I see.

You've cited a very old thread on here referring to the 2016/17 year but the rules changed earlier this year, so now you need to repay flexible withdrawals back into the same ISA, whereas previously you could pay them into different ones.

This post from 6 May explains:

https://forums.moneysavingexpert.com/discussion/comment/80768075/#Comment_80768075

If you believe you've found something currently published by HMRC that supports your view then please post a link or identify exactly where it is.

ni_saver

Currently: Chip £17000 old money, £0 new money

Initial movement: Chip -£17000 old money, £0 new money, T212 £17000 new money

If have extra £20000 to save before April 6th: Chip £17000 old money, £0 new money, T212 £20000 new money

This is my interpretation of what you want to do and it’s my understanding that this would be fine. I think it’s maybe unclear if you mean you wanted to add the £17000 from Chip and the £20000 new money to T212 before moving the £17000 back to Chip which wouldn’t be allowed, but I’m not convinced you did mean this so think it’s possible there might just be crossed wires between you and some other posters who have all posted accurate information. It’s my understanding it’s fine to move the £17000 from Chip to T212 (although I’d maybe leave a token £1 behind) and then you can top this up by another £3000 of new money, but any more than this will have to be replaced in Chip rather than more than £20000 being added to T212.

eskbanker

ni_saver said:

I think it’s maybe unclear if you mean you wanted to add the £17000 from Chip and the £20000 new money to T212 before moving the £17000 back to Chip which wouldn’t be allowed, but I’m not convinced you did mean this so think it’s possible there might just be crossed wires between you and some other posters who have all posted accurate information.

For the avoidance of doubt, that is exactly my interpretation of what OP had in mind:

Spoton00 said:

I plan to withdraw the most of the funds from the Chip isa and deposit them in the 212 isa, manually not through isa transfer. Obviously because 212 has better interest rates than chip. My intention is to hopefully fund the 212 isa with £20000 before April and also return the £17000 back  into the Chip isa before April 5th as well

i.e. earning the higher T212 interest on £37K for some of the year, which wouldn't be permitted without a transfer.  I have to say that it's still unclear why OP doesn't want to transfer from Chip to T212 though....

As you say, if it's simply about ending the year with £17K in Chip and £20K in T212 then just paying the £20K into T212 without moving anything from Chip would achieve that, or if the £20K won't be available early enough then moving the £17K now would improve interest, with £17K of the new money being used to refill Chip and the other £3K of new money being paid into T212.

Spoton00

Think most of you have got what I'm proposing. All the money isn't available at the moment which is why I'm moving it to 212 for the better interest. At the turn of the new tax year I intend to have £20000 new money in 212 isa and £17000 old money returned into the Chip isa. The £17000 old money was deposited in previous years. Apparently this can be replaced when withdrawen and returned in the same tax year. I'll obviously keep £10 in the Chip isa while the £17000 is staying elsewhere till April!!

jimjames

eskbanker said:

ni_saver said:

I think it’s maybe unclear if you mean you wanted to add the £17000 from Chip and the £20000 new money to T212 before moving the £17000 back to Chip which wouldn’t be allowed, but I’m not convinced you did mean this so think it’s possible there might just be crossed wires between you and some other posters who have all posted accurate information.

Spoton00 said:

I plan to withdraw the most of the funds from the Chip isa and deposit them in the 212 isa, manually not through isa transfer. Obviously because 212 has better interest rates than chip. My intention is to hopefully fund the 212 isa with £20000 before April and also return the £17000 back  into the Chip isa before April 5th as well

i.e. earning the higher T212 interest on £37K for some of the year, which wouldn't be permitted without a transfer.  I have to say that it's still unclear why OP doesn't want to transfer from Chip to T212 though....

One reason I could see would be that once a Chip ISA is transferred (closed) then they won't allow you to open another with them

Spoton00

jimjames said:

eskbanker said:

ni_saver said:

I think it’s maybe unclear if you mean you wanted to add the £17000 from Chip and the £20000 new money to T212 before moving the £17000 back to Chip which wouldn’t be allowed, but I’m not convinced you did mean this so think it’s possible there might just be crossed wires between you and some other posters who have all posted accurate information.

Spoton00 said:

I plan to withdraw the most of the funds from the Chip isa and deposit them in the 212 isa, manually not through isa transfer. Obviously because 212 has better interest rates than chip. My intention is to hopefully fund the 212 isa with £20000 before April and also return the £17000 back  into the Chip isa before April 5th as well

i.e. earning the higher T212 interest on £37K for some of the year, which wouldn't be permitted without a transfer.  I have to say that it's still unclear why OP doesn't want to transfer from Chip to T212 though....

One reason I could see would be that once a Chip ISA is transferred (closed) then they won't allow you to open another with them

I'll only have £20000 in my 212 isa this year, but would like to replace the £17000 I withdrew from my Chip isa before April, which will come from another source, so that I can keep the tax free rapper on it. What I really need confirmed is can I return the £17000 into Chip isa this year even though it was initially deposited in 2023-24 tax year?