Flexible ISA query

winkowinko

I am looking to open a Chip ISA paying 5.37% (including a 3 month bonus) for the 25/26 tax year. I intend to deposit the funds on 6th April (can't do it before as I'm already maxed out for this year). 

I would then like to make the usual test deposit/withdrawal of a small amount to see how quickly money can be withdrawn and added. Not essential, but it would give me peace of mind.

However, in 3 months time, once the Chip bonus has expired, I will likely be looking to transfer elsewhere.

Bearing in mind that I would have already replaced money into the Chip flexible ISA, would this mean that I couldn't use my new ISA as a flexible one?

slinger2

winkowinko said:

I am looking to open a Chip ISA paying 5.37% (including a 3 month bonus) for the 25/26 tax year. I intend to deposit the funds on 6th April (can't do it before as I'm already maxed out for this year). 

I would then like to make the usual test deposit/withdrawal of a small amount to see how quickly money can be withdrawn and added. Not essential, but it would give me peace of mind.

However, in 3 months time, once the Chip bonus has expired, I will likely be looking to transfer elsewhere.

Bearing in mind that I would have already replaced money into the Chip flexible ISA, would this mean that I couldn't use my new ISA as a flexible one?

No. You can have and use as many flexible cash ISAs as you like. But remember that you'll need to "replace" any withdrawn money from these to the same ISA, otherwise you'd probably be using up more of your £20k annual allowance.

winkowinko

slinger2 said:

winkowinko said:

I am looking to open a Chip ISA paying 5.37% (including a 3 month bonus) for the 25/26 tax year. I intend to deposit the funds on 6th April (can't do it before as I'm already maxed out for this year). 

I would then like to make the usual test deposit/withdrawal of a small amount to see how quickly money can be withdrawn and added. Not essential, but it would give me peace of mind.

However, in 3 months time, once the Chip bonus has expired, I will likely be looking to transfer elsewhere.

Bearing in mind that I would have already replaced money into the Chip flexible ISA, would this mean that I couldn't use my new ISA as a flexible one?

No. You can have and use as many flexible cash ISAs as you like. But remember that you'll need to "replace" any withdrawn money from these to the same ISA, otherwise you'd probably be using up more of your £20k annual allowance.

Right. So as a slightly different example, would this be correct?

Open Chip ISA and fund it with £20k on 6th April. At some point in the following 3 months, withdraw £1k.

After 3 months, open new flexible ISA elsewhere and transfer £19k.

Would that mean I could then withdraw/replace £19k into the new provider during 25/26 tax year? 

slinger2

winkowinko said:

slinger2 said:

winkowinko said:

I am looking to open a Chip ISA paying 5.37% (including a 3 month bonus) for the 25/26 tax year. I intend to deposit the funds on 6th April (can't do it before as I'm already maxed out for this year). 

I would then like to make the usual test deposit/withdrawal of a small amount to see how quickly money can be withdrawn and added. Not essential, but it would give me peace of mind.

However, in 3 months time, once the Chip bonus has expired, I will likely be looking to transfer elsewhere.

Bearing in mind that I would have already replaced money into the Chip flexible ISA, would this mean that I couldn't use my new ISA as a flexible one?

No. You can have and use as many flexible cash ISAs as you like. But remember that you'll need to "replace" any withdrawn money from these to the same ISA, otherwise you'd probably be using up more of your £20k annual allowance.

Right. So as a slightly different example, would this be correct?

Open Chip ISA and fund it with £20k on 6th April. At some point in the following 3 months, withdraw £1k.

After 3 months, open new flexible ISA elsewhere and transfer £19k.

Would that mean I could then withdraw/replace £19k into the new provider during 25/26 tax year? 

Yes that would work.

The "flexible" regulation says that "On any transfer under regulation 21, the right of the account investor ... in relation to an account transferred is to cease in respect of a withdrawal of a cash amount from the account made before the transfer." Regulation 21 is the main rule relating to transfers. So when you do the transfer you lose the right to replace any money withdrawn from the original ISA (within the flexible concept). You could leave a £1 behind I suppose if the T&Cs allow. Maybe that would let you replace the £1k later and then you'd need to do another transfer for that. All very complicated.

Qyburn

What do you actually want to do? That might be clearer than using hypothetical examples.

Originally you talked about making a small deposit, withdrawal and replacement prior to making the transfer. Then you describe depositing the full £20k, withdrawing £1,000 and not replacing it.

winkowinko

Qyburn said:

What do you actually want to do? That might be clearer than using hypothetical examples.

Originally you talked about making a small deposit, withdrawal and replacement prior to making the transfer. Then you describe depositing the full £20k, withdrawing £1,000 and not replacing it.

Yes, I realise that I went off on a bit of a tangent, but since my first question had been answered, I wanted to broaden it to get a better understanding of more than one scenario, and flexible ISAs in general.

What do I want to do? In the short term, I would like to park aprox £18k in a top-paying easy access ISA (Chip 5.37%) for 3 months on the 6th April. Main reason for choosing ISA over a savings account is that I have a bond maturing in about 3 months time, which will leave me with very little additional wriggle room for my 25/26 personal savings allowance.

I foresee needing to withdraw some money from the account (household stuff) in the next 3 months. Unsure whether I'll be replacing any of that money within 3 months. 

After the Chip bonus has expired, the rate will drop to 4.32%, and it's likely that I'll want to transfer to a new provider that is paying better interest. During the following 9 months, I may be in a position where I can replace some of the money that I have withdrawn from the Chip account. Obviously I wouldn't be able to deposit it back into the closed Chip ISA, but it seems like I wouldn't be able to replace it into the new ISA either.

Perhaps the simplest thing would be to just keep the Chip ISA for the duration of the 25/26 tax year and not try to chase a few extra 0. something % interest.

masonic

In your scenario, I would keep the money you would otherwise have withdrawn in a non-ISA savings account, then it will not have burned any of your ISA allowance, leaving you free to use the full £20k later in the year and freedom to transfer it without consequence.