ISA allowance question

Calidad

Hi,

I made a mistake by manually withdrawing £20,000 from my cash ISA into a current account prior to paying it into a new cash ISA that I opened with another provider.

I now realise I’ve used up this year’s allowance and will make sure I do transfers in future! 

However, the original ISA I withdrew from was opened in the previous financial year and states I have a £40,000 total allowance. It is also flexible ISA. Does this mean a) that I still have a £20,000 allowance left over, and if so am I able to for example open up a new S&S ISA with another provider prior to the next FY in April? I’m bit unsure as to what might be considered new money or old money? And b) Also, as the original cash ISA is a flexible ISA and effectively easy access, I assume anything I withdraw and then put back in won’t be considered new money? 

Many thanks. 

refluxer

Calidad said:

However, the original ISA I withdrew from was opened in the previous financial year and states I have a £40,000 total allowance. It is also flexible ISA. 

I would guess that the reason it's stating you have a £40k allowance is that you haven't paid any new subscriptions into it during the current tax year ? If that's the case, the fact that it's flexible means you can pay back the withdrawn £20k plus your current allowance of £20k, so £40k in total.

Calidad said:

Does this mean a) that I still have a £20,000 allowance left over, and if so am I able to for example open up a new S&S ISA with another provider prior to the next FY in April? I’m bit unsure as to what might be considered new money or old money? 

If you've withdrawn £20k from an ISA into your current account and paid that into a different ISA, then that becomes a new subscription and means you've used up all of your allowance from the current tax year, unfortunately.

Calidad said:

Also, as the original cash ISA is a flexible ISA and effectively easy access, I assume anything I withdraw and then put back in won’t be considered new money? 

That's right so if you withdrew it to your current account and then paid it back into the same ISA then you'd still have this year's allowance left but the fact that you paid this into another cash ISA means you've used up this year's allowance, I think. Hopefully someone more familiar with the way flexible cash ISAs operate can confirm this.

masonic

You could have paid the £20,000 back in to the original ISA before the end of the tax year, which would have undone your mistake. You could then have transferred it to the new cash ISA without using this year's allowance.

You can still, until the end of this tax year, pay up to £20,000 into the old ISA (and then transfer it to a S&S ISA if you wish), but you cannot pay new money into any other ISA, since you've used this year's allowance in full by paying the £20,000 you flexibly withdrew into a different ISA.

jimjames

refluxer said:

Calidad said:

Also, as the original cash ISA is a flexible ISA and effectively easy access, I assume anything I withdraw and then put back in won’t be considered new money? 

That's right so if you withdrew it to your current account and then paid it back into the same ISA then you'd still have this year's allowance left but the fact that you paid this into another cash ISA means you've used up this year's allowance, I think. Hopefully someone more familiar with the way flexible cash ISAs operate can confirm this.

If the OP has another £20k available outside an ISA wrapper they can still pay it into the old ISA as it's flexible and as long as it's done by 5th April. The new ISA has used this year's allowance so that can't be used elsewhere. 

Either the old (once funded again) or new ISA could be transferred to a S&S ISA if the OP wanted.

refluxer

jimjames said:

refluxer said:

Calidad said:

Also, as the original cash ISA is a flexible ISA and effectively easy access, I assume anything I withdraw and then put back in won’t be considered new money? 

That's right so if you withdrew it to your current account and then paid it back into the same ISA then you'd still have this year's allowance left but the fact that you paid this into another cash ISA means you've used up this year's allowance, I think. Hopefully someone more familiar with the way flexible cash ISAs operate can confirm this.

If the OP has another £20k available outside an ISA wrapper they can still pay it into the old ISA as it's flexible and as long as it's done by 5th April. The new ISA has used this year's allowance so that can't be used elsewhere. 

Ah yes, of course - that makes sense. Thanks for the clarification. 

Calidad

Thanks all. So if I understand correctly I could for example pay £5000 (or up to 20k) into my original ISA and then transfer that amount into a S+S ISA with another provider in this FY? That would mean the “old” money is in a new S+S ISA and the “new” money is in the cash ISA I opened a few months ago.

If I transferred 5K into a new S+S ISA, would I then for example be able to top that up by £250 each month for the rest of the FY? 

OR

If I hold fire on opening a S+S ISA until next FY, can I use the original ISA (ZOPA) as a easy access savings account, as it’s flexible and easy access? I.e move money into it each month when I get paid and withdraw throughout the course of the month to pay bills etc - and repeat this until the end of the current FY? 

Thanks again 

masonic

Calidad said:

Thanks all. So if I understand correctly I could for example pay £5000 (or up to 20k) into my original ISA and then transfer that amount into a S+S ISA with another provider in this FY? That would mean the “old” money is in a new S+S ISA and the “new” money is in the cash ISA I opened a few months ago.

If I transferred 5K into a new S+S ISA, would I then for example be able to top that up by £250 each month for the rest of the FY? 

OR

If I hold fire on opening a S+S ISA until next FY, can I use the original ISA (ZOPA) as a easy access savings account, as it’s flexible and easy access? I.e move money into it each month when I get paid and withdraw throughout the course of the month to pay bills etc - and repeat this until the end of the current FY? 

Thanks again 

Essentially yes, but you can only pay money into that original ISA. If you fully transfer it to a S&S ISA, then at that point you cannot pay any more money in until the next tax year. You may be better off taking the second approach, then you can transfer into the S&S ISA towards the end of the tax year when you've replaced as much as possible.