Multiple flexible ISAs on the go to benefit from best interest rates?

haedir

Given that flex ISAs are subject to rate changes, is it good financial sense to have two or more on the go at the same time, funded by ‘old’ ISA money, so that when the rate in ‘ISA A’ increases above ‘ISA B’, I can withdraw it all from ISA B and shift it to ISA A? And conversely when ISA B’s rate overtakes ISA A, I can move it back. And because it’s ‘old’ ISA money, not the 2025/26 investment, I don’t have to worry about putting it back to its originating ISA. Does this sound right? Many thanks

masonic

No that's not correct. If you withdraw old money from one ISA, it will count as new money when you pay it into another. The only way to preserve ISA status is to request an ISA transfer by approaching the provider you with to move the funds to.

Only flexible ISAs allow you to withdraw and replace money, and it can only be replaced into the same ISA it was removed from.

slinger2

As noted, that's not correct. Whether the money is "old" or "new" doesn't make any difference. What does matter is that with a flexible ISA you need to replace the money in the same tax year that you withdrew it. And importantly it needs to be replaced into the same ISA that you withdrew it from. Otherwise you'll be using up some of your annual allowance.

haedir

Thank you Masonic and Slinger2, that’s much appreciated. So if i TRANSFER old ISA money between A and B (not withdraw), then I can
follow the best deals for weeks or months at a time, going back and forth to follow the best rates. I also see that WITHDRAWING is the no go, even if it’s ‘old’ ISA money (I knew that bit, just temporarily forgot!)
Also, whatever I transfer between the two flexible ISAs must be returned to its ‘home’ before financial year end, to be preserved.
And that ‘new’ ISA investment money (£20k for 2025/26) works in the same way - must be returned to ‘home’ by year end, but can be transferred back and forth between flexible ISAs to follow the best rates.
This has only really become a ‘thing’ because the flexible ISAs are offering far better rates than easy access and fixed at the mo….
so it pays to be vigilant!
many thanks again 😀

slinger2

Not quite right. If you do a "transfer" from one ISA to another ISA then you don't use any of the current year's allowance, whether it's flexible or not, and whether the ISA contains old or new money. So there's no need to move it back to the original ISA.

A "flexible" ISA is only useful if you replace the money into the same ISA. Since the rule changes in April 2024 it can't be used to move money from one ISA to another (without of course using more of your allowance).

The disadvantage of a transfer is that it's a relatively slow process.

haedir

Ok Slinger2. Thank you for your patience.
i think you’ve lost me there.
rule change?
As far as old ISA money is concerned, can I transfer between two flexible ISAs to chase the best rates? Or are you saying the rule change means I cannot do this?
I’m clear on the new ISA funds (a new £20k deposited for the first time in 2025/26) - this has to return to the originating flexible ISA by year end.
Most of my ISA savings are old ISAs, so I want to make it work for me by chasing the best rates….if I’m allowed to….thus keeping it within the isa system, transferring it around (not withdrawing)….many thanks

friolento

"flexible" and "ISA transfers" are two entirely different, and unrelated, things.I have a feeling you are mixing these up somehow.

You can make ISA transfers out of any ISA, whether it is flexible or not does not matter. Not all providers support ISA transfers-in, not all support partial ISA transfers, current year deposits must be transferred in full, transfers-out can lead to closure of old ISA and may prohibit any future ISA with the same provider, etc etc.. ISA transfers must be initiated by the receiving provider, otherwise they are not ISA transfers but withdrawals at the old provider, and new deposits at new provider, thereby counting against the current year ISA limit. A properly executed ISA transfer does not affect the annual ISA allowance. You can request as many ISA transfers as you like. Some / most are very quick, some can take ages.

Flexible ISAs allow you to make withdrawals up to the balance of the ISA yourself, and you may re-deposit up to the withdrawn amount into the same ISA in the same tax year.You can do with the withdrawn balance as you please, including depositing up to your remaining annual ISA limit into one or more ISAs with pne or more different providers. If the new ISA(s) is also flexible, you can withdraw and replace as you did with the original ISA. You can also ISA transfer-out of the new ISA, same rules as for any ISA transfer.

So any merry-go round of withdrawing and depositing among different flexible ISAs is strictly limited by your annual ISA allowance, max £20,000 (less if you have used some of your allowance for a LISA). I very much doubt you would make any substantial gains from max £20k even if all ISAs were flexible which clearly they are not. Obviously, if there are any better paying ISAs around, you'd probably want to move your existing ISA(s) into the better paying account. You'd do this with an ISA transfer, and if there is indeed a reason later on to go back to the old ISA provider, you'd do another ISA transfer.

haedir

Friolento, you guessed right - I was confusing the terminology. You’ve explained it beautifully, thank you!

Here’s an example of the sort of thing i want to do:

Say I had 50k in a flexible ISA at 4.5%.
I have just opened another flexible ISA which has entered the market at 5.7%.

To make the most of the enhanced rate I should transfer, say, 49k of my 50k to the new ISA.
I should also add this year’s 20k investment to the new ISA, giving me 69k at 5.7%.

If the rate suddenly drops and the 4.5% product is then the best again, I can transfer 68k back, leaving just 1k behind. Or should I leave the ‘new’ 20k where it is for fear of incurring a penalty?

Transferring might incur delays but keeps it all tax free.

The benefit of the flexible ISA seems
to be about being able to borrow from yourself without losing out on the tax breaks. 

So, in a separate example, say later on in 2025/26 I could WITHDRAW 8k from a flexible ISA to pay for a holiday, knowing that I’ll be selling my car in a few months which means I can put the 8k back in to the same flexible ISA by year end. This would be acceptable and I’d still be allowed to invest another 12k of new money (e.g. sale of my caravan) in either of my flexible ISAs during 2025/26.

Have I got that right?!
so grateful for the help from you all…

I don’t have much money but I’ve worked hard for it and need to look after it…
many thanks ☺️ 

kimwp

Maybe think of it this way.
- You can add up to 20k new money to your ISA pot each financial year.
- you can transfer your ISAs between providers without affecting your remaining ISA allowance for that financial year (where a transfer is requesting the providers to do an ISA transfer, NOT withdrawing the money yourself.
- flexible ISAs allow you to withdraw and return money without using up more of your ISA allowance as long as you return it to the ISA you withdrew it from and withdraw and return it within the same financial year.

friolento

haedir said:

 

If the rate suddenly drops and the 4.5% product is then the best again, I can transfer 68k back, leaving just 1k behind. Or should I leave the ‘new’ 20k where it is for fear of incurring a penalty? 

The 5.7% is probably an illusion as this rate might only apply to new money, not to transfers. You might also be caught out by restrictive transfer-in terms somehere along the way.

You should read the T&Cs of the ISAs you are considering in detail. I maintain that you are unlikely to make much gain from the merry go round you are considering- or worse, you could actually end up with less money you would have made if you sat tight. I regret, I won’t have time to further look into this for you - just to repeat, read the T&Cs, and do your numbers.

haedir

Many thanks Friolento and kimwp- much appreciated 👍👍