What happens to ISA Allowance if you spend some of the capital?

jimjames

Phillipo27 said:

eskbanker said:

Phillipo27 said:

Kim_13 said:

@Phillipo27

You say it’s in the new tax year that you need to spend the money, so pay £4,001 into a Flexible ISA that has a minimum balance of £1 now using 24/25’s allowance and withdraw the £4,000 on 6 April or later. This then gives you until 5 April 2026 to pay that £4,000 back into the ISA you withdrew it from (which is fine, as you’ve kept it open with £1.) It’s essential that even if the ISA you have becomes uncompetitive, you do not transfer it elsewhere using the ISA transfer process until you have repaid that £4,000 - as transferring an ISA elsewhere removes any flexible ISA allowance that had been built up.

This would then leave your 2025/2026 allowance untouched, which is £20,000 unless there is a last minute change at the Spring Statement.

Some pointers as to which ISAs are Flexible ISAs in this guide: https://www.moneysavingexpert.com/savings/flexible-isas/ . But be sure to check the terms of your selected product carefully in case anything has changed as you must get a Flexible one in order for this to work.

Ah - so you are saying different to eskbanker - you are saying that if I have a flexible isa - i can add the money this tax year - remove it next tax year ie on 6 April (or later) but still then have rest of next tax year to pay it back without losing any of 205/26 allowance and keeping my 2024/25 allowance at £4001.

Not sure how you're concluding it's different - with a flexible ISA, you can withdraw as much as you like and replace it within the same tax year without affecting the current year's contribution allowance, which is said in both posts?

That's how I concluded they were different.  If you are both saying I can invest an amount in 2024/25 (say £4001) - In 2025/26 withdraw (£4000) after 6 April and replace in say May - this would mean paying new funds into this account in the 2025/2026 tax year.  But if that leaves my 2024/25 allowance at £4001 and I am still free to invest the full £20,000 in 2025/2026 tax year that is great!

You could have a flexible ISA with £100,000 in it accumulated over a number of years. You could withdraw £90k from that and be able to repay it into that flexible ISA before the end of the tax year and have zero impact on any other contribution limits for the current tax year.

Phillipo27

slinger2 said:

As noted, the important thing about a flexible ISA is that you need to replace the money in the same tax year that you withdrew it, to avoid the replacement counting as new money. Whether it contained last year's money or this year's or has just been transferred in or whatever doesn't really matter.

Perfect - thank you!