Jan 2025 - Can I take more out of a flexible ISA account than in to fund another ISA

LL_USS

@eskbanker May I ask you this question please (thank you for having answered to some of my saving questions elsewhere). Anyone else who can give any insight, please do, thank you. Sorry the title of the thread is not great.

I am opening a three years fixed Shawbrook bank ISA and was about to withdraw money out from a flexible Trading 212 ISA to put what I can into the new Shawbrook account without having to close Trading 212 (the idea is so I can still keep using this Trading212).

I have just read around to see that "you have to replace the money you take out of a flexible ISA in the same tax year" (https://www.moneysavingexpert.com/savings/flexible-isas/). 

Does this mean if I at once point already reached a total deposit (money in) of 16K into Trading 212 even though I still kept on putting in, taking out etc., I cannot take (meaning withdraw) 15K out of this Trading 212 flex ISA to put in a new account? Because in Trading 212's eye I still have used 16K allowance of this year, and thus I cannot use another 15K allowance to deposit into Shawbrook ISA. 

Does this mean the only way to move the Trading 212 money into Shawbrook is to transfer it in as if I do not replace this 15K back to Trading 212 I still use up 16K allowance already for this year?

My apology if my question is not very well worded. If it's not very easy to understand, I'll try to express this better when I have a clearer head.

eskbanker

Yes, if you've paid £16K into T212 this tax year then you can only pay £4K into Shawbrook as new money, and your other option is to make a partial transfer from T212 to Shawbrook.

LL_USS

Thank you @eskbanker.

What would happen if I (assumingly having not knowing and made a mistake thus) had taken £15K out of Trading 212 Flex Isa to a current account then Shawbrook did not know about this and still deposit 15K into my new Shawbrook ISA?At what point would someone realise this (HMRC, Shwbrook, or Trading212.. if it was not me, like this? This is just a hypothetical question, I just want to understand. And as I already put in 16K to Trading 212, if at the end of the financial year, I only put back enough to bring it to 15K, would they penalise me? Sorry I have many questions. Reading through all sort of information today has done my head in.

Also I already completed an application for Shawbrook 3y fixed ISA (yesterday) and it's open now. I put in 1K minimum and tranferred the whole of Virgin ISA in. I don't think I can add a partial transfer in now.

eskbanker

LL_USS said:

What would happen if I (assumingly having not knowing and made a mistake thus) had taken £15K out of Trading 212 Flex Isa to a current account then Shawbrook did not know about this and still deposit 15K into my new Shawbrook ISA?At what point would someone realise this (HMRC, Shwbrook, or Trading212.. if it was not me, like this? This is just a hypothetical question, I just want to understand.

Both providers would report the deposits to HMRC, who'd eventually recognise that you'd exceeded your allowance and would have the right to determine the later one to be invalid.  They can instruct the provider to remove the subscription and insist that it's treated as taxable, but my understanding is that first time 'offenders' are typically excused, unless it's egregious abuse of the rules.

LL_USS said:

Also I have already completed an application for Shawbrook 3y fixed ISA and it's now open, I don't think I can add a partial transfer in now.

If you're within the cooling-off period you could cancel it and start again, or has it been withdrawn from sale?  Or can you open another in parallel perhaps (think Shawbrook may not allow this)?

Edit: noticed your later edit:

LL_USS said:

And as I already put in 16K to Trading 212, if at the end of the financial year, I only put back enough to bring it to 15K, would they penalise me?

No, replacement subscriptions can be up to the amount withdrawn but there's no obligation to pay the whole amount back in.

LL_USS

Thank you @eskbanker very much. I see

I have also just added a question: And as I already put in 16K to Trading 212, if at the end of the financial year, I only put back enough to bring it to 15K, would they penalise me? Do you know about this too?

LL_USS

eskbanker said:

LL_USS said:

Also I have already completed an application for Shawbrook 3y fixed ISA and it's now open, I don't think I can add a partial transfer in now.

If you're within the cooling-off period you could cancel it and start again, or has it been withdrawn from sale?  Or can you open another in parallel perhaps (think Shawbrook may not allow this)?

Thank you I'll email and ask them. It's still within 14 days cooling period.

Again I really appreciate your prompt help. I can rest my head a bit now. So no I won't take 15K out of Trading 212 and put in the new ISA. Phew! I almost made that mistake thinking how clever the move would be, eek.

LL_USS

eskbanker said:

Edit: noticed your later edit:

LL_USS said:

And as I already put in 16K to Trading 212, if at the end of the financial year, I only put back enough to bring it to 15K, would they penalise me?

No, replacement subscriptions can be up to the amount withdrawn but there's no obligation to pay the whole amount back in.

That's better than I thought then. 

Just to summarise: at the end of the FY it's okay for me to end up with only 15K in Trading212 though at one point my deposit reached 16K; yet I still have used up 16K of this year's allowance and can only put 4K (not 5K) in another ISA within this year.

PS: sorry, yes,  I often keep editing my posts in this forum - I am just nervous and worried about my ignorance - there's so much I don't know. Again, thanks for your help, this time and other times.

slinger2

LL_USS said:

eskbanker said:

Edit: noticed your later edit:

LL_USS said:

And as I already put in 16K to Trading 212, if at the end of the financial year, I only put back enough to bring it to 15K, would they penalise me?

No, replacement subscriptions can be up to the amount withdrawn but there's no obligation to pay the whole amount back in.

That's better than I thought then. 

Just to summarise: at the end of the FY it's okay for me to end up with only 15K in Trading212 though at one point my deposit reached 16K; yet I still have used up 16K of the allowance and can only put 4K (not 5K) in another ISA.

That's correct. You'd only have £4k left of this year's allowance to use up to 5 April 2025. Of course you get another £20k allowance for the year starting 6 April 2025.

As noted above, another option would be to "transfer" your ISA (or some of it) from T212 to Shawbrook. This retains it within the ISA system and doesn't use any of your annual £20k allowance. In theory you could do this anytime, but check out whether T212 and Shawbrook allow what you want.

LL_USS

@slinger2 thank you for confirming the understanding.

I am thinking instead of asking Shawbrook whether they allow another transfer-in, I can find another 3year fixed that allows transfer in (for e.g. UBL UK), as the transfer will be more than the minimum 2K deposit requirement, I can even open it with a nil balance + transfer in. Then I can have this 15K (now in Trading 212) on a fixed rate of 4.41% with UBL for 3 years. I believe we can open and pay in multiple ISAs in a FY, as long as the total pay in does not exceed the allowance.

OR just keep Trading 212 where it is and perhaps try to use its flexibility for some goodness. For e.g. not paying much in next year, but temporarily take some money out to do something useful, grow any saving I have next year in any higher rate saving account (not much hope for any high saving rates next year to be honest), then put the (more inflated) money into an ISA that works better for medium term. Perhaps I experiment too much in this journey to learn how to manage finance ;-).

A good thing with Shawbrook is I can still put in more money during the duration of the fixed period it seems (https://www.shawbrook.co.uk/savings/help/depositing-withdrawing-from-your-account/#can-i-make-more-than-one-deposit). That means I can put next year's allowance in, and perhaps the year after too into this still and still got the fixed rate.

LL_USS

@eskbanker can I please ask you another question regarding how to use my flexible ISA account?

After thinking back and forth, I am considering keeping my flexible Trading 212 ISA as it is (16K for this year's allowance, not transfering to a longer fix) to use for less likely emergency, for e.g. losing my job.

So let's say this 16K will be fixed in the account by the end of this financial year.

What if I don't put any new money in after 6 April 2025, and just withdraw some money out from that account, and hope to put it back by the end of the year. It should be fine that way right? By 6 April 2026 if I have any saving I'll put it in another ISA.

Repeat for the future years.

Could you please let me know if this approach goes against any rules with a flexbile account (using money and putting back, not adding new money)?

Many thanks

eskbanker

Withdrawals from a flexible ISA present the opportunity to replenish but absolutely no obligation to do so!