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

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  • Chaykin
    Chaykin Posts: 101 Forumite
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    Sorry for resurrecting the topic but still trying to get my head around how flexible ISAs work.

    Let's say I never had any ISAs before. I now open up two flexible Cash ISAs with different providers. I pay £20,000.00 into both of them. Before 5th of April I withdraw the full £20,000.00 from one of them. What happens then? Do I get taxed on the interest on the ISA I withdrawn from?
  • masonic
    masonic Posts: 27,352 Forumite
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    Chaykin said:
    Sorry for resurrecting the topic but still trying to get my head around how flexible ISAs work.

    Let's say I never had any ISAs before. I now open up two flexible Cash ISAs with different providers. I pay £20,000.00 into both of them. Before 5th of April I withdraw the full £20,000.00 from one of them. What happens then? Do I get taxed on the interest on the ISA I withdrawn from?
    You breach the annual allowance and HMRC will probably follow up with you some months or years down the line.
  • kimwp
    kimwp Posts: 2,996 Forumite
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    I think you need to understand the basic rules and then you can apply them to any scenario. These are: Anything that is moved into an ISA (from a non-ISA*) during the tax year counts towards the 20k, with the exception that anything that is withdrawn from a flexible ISA can be returned to the ISA it was withdrawn from without counting towards the allowance.

    *Anything transferred directly from an ISA to another ISA (following the ISA transfer process IE NOT being moved by you) doesn't count towards this allowance.
    Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.php

    For free, non-judgemental debt advice, try: Stepchange or National Debtline. Beware fee charging companies with similar names.
  • slinger2
    slinger2 Posts: 1,012 Forumite
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    Flexible ISAs let you replace money that you have previously withdrawn (replacing in the same ISA in the same tax year). They don't let you break the fundamental rule that you can only put £20k of new money into all your ISAs in any tax year.
  • Chaykin
    Chaykin Posts: 101 Forumite
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    edited 25 July at 6:41PM
    Thanks for your answers guys - this forum is great! One more scenario question I'm not sure on if you don't mind please:
    Let's say I opened a flexible Cash ISA in the previous tax year (2024/25) and paid in £10,000.00.
    In the current tax year (2025/26):
    I withdraw £5,000.00 from that Cash ISA.
    I then pay £4,000.00 back into it a week later.
    Subsequently I open a new flexible Cash ISA with a different provider and transfer (following the ISA transfer process, not manually) £6,000.00 to it.
    At the end of this process can I still pay in another £1,000.00 to the first ISA provider and full £20,000.00 to the new provider?
  • kimwp
    kimwp Posts: 2,996 Forumite
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    Chaykin said:
    Thanks for your answers guys - this forum is great! One more scenario question I'm not sure on if you don't mind please:
    Let's say I opened a flexible Cash ISA in the previous tax year (2024/25) and paid in £10,000.00.
    In the current tax year (2025/26):
    I withdraw £5,000.00 from that Cash ISA.
    I then pay £4,000.00 back into it a week later.
    Subsequently I open a new flexible Cash ISA with a different provider and transfer (following the ISA transfer process, not manually) £6,000.00 to it.
    At the end of this process can I still pay in another £1,000.00 to the first ISA provider and full £20,000.00 to the new provider?
    By my understanding of the ISA rules, yes. But you'd need to check with the provider if they were happy for you to transfer part of the isa and put money back into it.
    Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.php

    For free, non-judgemental debt advice, try: Stepchange or National Debtline. Beware fee charging companies with similar names.
  • slinger2
    slinger2 Posts: 1,012 Forumite
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    Yes, seems ok.

    As long as the 24/25 ISA still exists you can put the £1k back in (before the end of the tax year) without using any of your annual allowance.

    Transfers don't use any of your £20k allowance, and neither does the withdrawal/replacement from the flexible ISA, so you've still got the full £20k allowance available.
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