Flexible ISA and Investment Question

MoneyMan01

First of all I will say that I am well aware investing should be for the long term. I have a S&S ISA already but the question I have here is more specifically with regards to what is allowed regarding the ISA allowance.

If, in one Flexible Cash ISA there was £80k, built up from multiple years, and another Flexible Cash ISA from this tax year that has £20k in, could you in theory withdraw that £100k from both, invest it, and then before the end of the tax year, sell the investments, in the hope it made, let's say 10% for example, and deposit the £80k back into the Flex Cash ISA, and the £20k back into the current Flex Cash ISA?

masonic

You could indeed do that. More commonly, someone might borrow from their flexible cash ISAs to buy investments and then use their earnings or maturing savings elsewhere to top their cash ISAs back up.

MoneyMan01

I know that is what banks are basically doing with our money anyway.

Is there a way to invest within a tax efficient blanket, such as a S&S ISA, without taking money out of the Flex Cash ISA's?

For example, £85k being built up in the Flex Cash ISA is good from a tax perspective, is there a way it can be used within there, to use a S&S ISA for the £80k, rather than just the current £20k a year allowance?

You mentioned borrowing from the flex cash isa to buy investments, so looking for an example in what you meant there? 

masonic

If you want to use a S&S ISA, then you would need to do an ISA transfer from the cash ISA(s) to the S&S ISA. That is the only way to get money in without it counting towards your annual allowance. A S&S ISA offers much more flexibility to move from riskier investments back to cash-like instruments, such as money market funds and gilts, all within the S&S ISA.

Archerychick

No, because you’ve already used this years £20k allowance. You could only move funds by a transfer but you couldn’t use the flexible rules for this, so you wouldn’t be able to close the loop at the end of the year. 

MoneyMan01

But they are both flexible cash ISA's. Surely that means I can withdraw from both, and return the amount I withdraw, regardless of any allowance, as I've built up that amount in the flexible cash ISA wrapper for a reason?

Archerychick

Apologies you didn’t mention this. So yes as long as you’re not paying more than £20k new money into an isa in each year you’re fine. So in the example given, you’d need to have flexible money already withdrawn from you S&S isa, so you could take money out of your cash isa and put this into your S&S isa 

slinger2

You can withdraw the £100k from the two Cash ISAs and replace it in those same two Cash ISAs later the same tax year. That's no problem. However, you've used your £20k allowance for the year, so you can't put any of the £100k that you've withdrawn into a S&S ISA. You could invest it in a non-ISA General Investment Account.

Of course, you could simply "transfer" the Cash ISAs to a S&S ISA.

ColdIron

MoneyMan01 said:

But they are both flexible cash ISA's. Surely that means I can withdraw from both, and return the amount I withdraw, regardless of any allowance, as I've built up that amount in the flexible cash ISA wrapper for a reason?

What you can't do is put that money into a different ISA, the S&S ISA, because you have already used your allowance and to use an ISA flexibly you must replace the money in the same ISA

• You must replace the money in the same ISA

• The key rule is you must replace the money in the same ISA account you took it out from, otherwise the deposit will count towards your £20,000 annual limit.

https://www.moneysavingexpert.com/savings/flexible-isas

20122013

MoneyMan01 said:

But they are both flexible cash ISA's. Surely that means I can withdraw from both, and return the amount I withdraw, regardless of any allowance, as I've built up that amount in the flexible cash ISA wrapper for a reason?

From what I understand, if it is a Flexible Cash ISA, if you want to put back the amount you have withdraw , it had to be pay back to that account by the end of that tax year, the amount can be less but not more than you have taken out. So it you take x amount from Flexi ISA to S&S ISA, and you made Y, I think Y will be within the tax wrapper and if you want, you can move X back to Flexi ISA or Y, as long as Y does not exceed X. ie you cannot pay back more than you have taken out of the Flexi ISA.

masonic

MoneyMan01 said:

But they are both flexible cash ISA's. Surely that means I can withdraw from both, and return the amount I withdraw, regardless of any allowance, as I've built up that amount in the flexible cash ISA wrapper for a reason?

There is no problem withdrawing from the flexible ISAs and replacing the money before the end of the tax year.

What you cannot do is pay money into a S&S ISA after having already put £20k into a flexible cash ISA during this tax year. You have used all of your ISA allowance already. Your only option is an ISA transfer, rather than funding from a flexible withdrawal.