Withdraw from flexible ISA & pay into new 25/26 ISA vs Transfer

Speculator

Daughter recently turned 18 and I helped her to transfer her Coventry JISA to a Coventry 6 access ISA paying 3.90%. Her balance is just over £20k. This ISA  is a Flexible ISA.

She also recently opened a Saffron Online easy access ISA paying 4.4% and has so far paid in £25.

Just incase Rachel Reeves reduces the £20k cash Isa allowance, would it be sensible for my daughter to withdraw money (instead of doing a ISA transfer) from her Coventry Flexible ISA and fill up her Saffron 25/26 ISA.

That way, I assume she still has until next April to fill up her Coventry Flexible ISA back up to the original amount.

friolento

Withdrawing money from an ISA removes its tax wrapper. Depositing into a different ISA will use ISA allowance.

I am not sure what you want to achieve? Unless your daughter has extra money for 25-26, shuffling money between the ISAs doesn't appear to provide any advantage.

Also, nobody knows what may or may not be announced in the autumn. If you want to protect your 25-26 £20k allowance, best use it before the Budget if you can.

Speculator

friolento said:

Withdrawing money from an ISA removes its tax wrapper. Depositing into a different ISA will use ISA allowance.

I am not sure what you want to achieve? Unless your daughter has extra money for 25-26, shuffling money between the ISAs doesn't appear to provide any advantage.

Also, nobody knows what may or may not be announced in the autumn. If you want to protect your 25-26 £20k allowance, best use it before the Budget if you can.

The Coventry is a Flexible ISA.

friolento

Speculator said:

friolento said:

Withdrawing money from an ISA removes its tax wrapper. Depositing into a different ISA will use ISA allowance.

I am not sure what you want to achieve? Unless your daughter has extra money for 25-26, shuffling money between the ISAs doesn't appear to provide any advantage.

Also, nobody knows what may or may not be announced in the autumn. If you want to protect your 25-26 £20k allowance, best use it before the Budget if you can.

The Coventry is a Flexible ISA.

I know.

Still can't see the rationale.

Perhaps a worked example of how much is planned to be moved / deposited etc and when would help.

Speculator

With a Flexible ISA, don't you get until the end of the current Tax year to return withdrawn funds?

slinger2

If something is announced the change will almost certainly take effect in April 2026. So you plan doesn't seem to have any purpose. 

surreysaver

friolento said:

Speculator said:

friolento said:

Withdrawing money from an ISA removes its tax wrapper. Depositing into a different ISA will use ISA allowance.

I am not sure what you want to achieve? Unless your daughter has extra money for 25-26, shuffling money between the ISAs doesn't appear to provide any advantage.

Also, nobody knows what may or may not be announced in the autumn. If you want to protect your 25-26 £20k allowance, best use it before the Budget if you can.

The Coventry is a Flexible ISA.

I know.

Still can't see the rationale.

Perhaps a worked example of how much is planned to be moved / deposited etc and when would help.

The rationale is you use up your ISA allowance, which then allows you to withdraw the money and replace it again within the tax year.
If the ISA allowance gets reduced mid-year, then the thought process is you will still be able to replace withdrawn funds. 
I'll likely do something similar; take money out of a previous year's flexible ISA and use it to fill up a current year ISA. And replace the previous year's money towards the end of the tax year.

slinger2

In theory something could be changed mid-year, eg the allowance, but it's highly unlikely. They could scrap flexible ISAs mid-year or scrap Cash ISAs completely mid-year. Anything is theoretically possible. It's just that somethings are much more likely that others. Personally I'm assuming that there'll be no mid-year changes. There's more important things to panic about.

Speculator

slinger2 said:

In theory something could be changed mid-year, eg the allowance, but it's highly unlikely. They could scrap flexible ISAs mid-year or scrap Cash ISAs completely mid-year. Anything is theoretically possible. It's just that somethings are much more likely that others. Personally I'm assuming that there'll be no mid-year changes. There's more important things to panic about.

Martin wrote this in his recent email which got me thinking.

But if it happens as rumoured, it WOULDN'T impact money already in cash ISAs, it'd just cut what you can put in, in future. Whether it'd start immediately, or in January or April 2026, no one knows (including at this point, I suspect, Rachel Reeves). Yet if you plan to save in a cash ISA, all of this would suggest getting it in sooner would seem safer.