Flexible ISA Replacement Rules Confusion

Growingold

I thought that withdrawal of current year funds from a flexible ISA had to be replaced from the account it had been withdrawn from.

But reading the below in the new Coventry 5 Access ISA t & c I am wondering now if this is the case?

Each withdrawal of Current Tax Year Subscriptions from this ISA account automatically reduces the total subscriptions (deposits) made into it during that Tax Year. Replacement deposits can be paid back into this ISA account or, if you choose, into another ISA account (flexible or non-flexible) with another ISA Manager. All replacement deposits must be paid in to the ISA account before the end of the same Tax Year that the withdrawn funds were removed.

Albermarle

Maybe related to this?
Change to the Flexible ISA Regulation (5DDB) dated 15 July 2025 — MoneySavingExpert Forum

clairec666

I hadn't noticed that regulation update, so I've still been quoting the rule that flexible withdrawals must be returned to the same account. Surely if this has changed there will be much confusion between providers? At the moment I have ISAs with four different providers, and all of them keep their own count of how much you are still able to deposit in the current tax year. So if you had already deposited £20000 with them this tax year, they might block any further deposits, not knowing that you had withdrawn from a flexible ISA elsewhere. I imagine some ISA providers may take a while to catch up with this.

Albermarle

Good point,
I imagine if you tried to add £50K to a new ISA, they might well object !

kimwp

clairec666 said:

I hadn't noticed that regulation update, so I've still been quoting the rule that flexible withdrawals must be returned to the same account. Surely if this has changed there will be much confusion between providers? At the moment I have ISAs with four different providers, and all of them keep their own count of how much you are still able to deposit in the current tax year. So if you had already deposited £20000 with them this tax year, they might block any further deposits, not knowing that you had withdrawn from a flexible ISA elsewhere. I imagine some ISA providers may take a while to catch up with this.

True!!

If you are under the 20k net going in, then I think you'll be ok as the providers only report the net in according to the tax guidance I looked at. But if you are withdrawing from previous years...!

Edit- I just looked at that linked post, it seems to say that previous years need to be returned to the same ISA

slinger2

clairec666 said:

I hadn't noticed that regulation update, so I've still been quoting the rule that flexible withdrawals must be returned to the same account. Surely if this has changed there will be much confusion between providers? At the moment I have ISAs with four different providers, and all of them keep their own count of how much you are still able to deposit in the current tax year. So if you had already deposited £20000 with them this tax year, they might block any further deposits, not knowing that you had withdrawn from a flexible ISA elsewhere. I imagine some ISA providers may take a while to catch up with this.

Since (even if my interpretation of the change is correct) the ability to replace the money is limited to this year subscriptions there will still be a limit of £20k that be added. Although having said that, maybe there could be some interest from that money too??

Albermarle

slinger2 said:

clairec666 said:

I hadn't noticed that regulation update, so I've still been quoting the rule that flexible withdrawals must be returned to the same account. Surely if this has changed there will be much confusion between providers? At the moment I have ISAs with four different providers, and all of them keep their own count of how much you are still able to deposit in the current tax year. So if you had already deposited £20000 with them this tax year, they might block any further deposits, not knowing that you had withdrawn from a flexible ISA elsewhere. I imagine some ISA providers may take a while to catch up with this.

Since (even if my interpretation of the change is correct) the ability to replace the money is limited to this year subscriptions there will still be a limit of £20k that be added. Although having said that, maybe there could be some interest from that money too??

This link is a bit easier to read, and confirms that only this years subscriptions can be taken from one flexible ISA, and added back into another one.
Individual Savings Account and Child Trust Funds — (Amendment) Regulations 2025 - GOV.UK

Although it does not appear to mention a date when this new situation will start.
Although looking at the info from Coventry BS in the OP, it seems to have started already.

clairec666

slinger2 said:

clairec666 said:

I hadn't noticed that regulation update, so I've still been quoting the rule that flexible withdrawals must be returned to the same account. Surely if this has changed there will be much confusion between providers? At the moment I have ISAs with four different providers, and all of them keep their own count of how much you are still able to deposit in the current tax year. So if you had already deposited £20000 with them this tax year, they might block any further deposits, not knowing that you had withdrawn from a flexible ISA elsewhere. I imagine some ISA providers may take a while to catch up with this.

Since (even if my interpretation of the change is correct) the ability to replace the money is limited to this year subscriptions there will still be a limit of £20k that be added. Although having said that, maybe there could be some interest from that money too??

Ah, good point. So each ISA will still restrict you to £20000 a year and the onus is still on the customer to make sure they're not exceeding the limit across multiple accounts.

Not sure about the interest though - I guess you could deposit £20000, gain £100 interest, then withdraw £20100 which would be "this year's funds" and presumably should be allowed to deposit it elsewhere?

slinger2

Albermarle said:

slinger2 said:

clairec666 said:

I hadn't noticed that regulation update, so I've still been quoting the rule that flexible withdrawals must be returned to the same account. Surely if this has changed there will be much confusion between providers? At the moment I have ISAs with four different providers, and all of them keep their own count of how much you are still able to deposit in the current tax year. So if you had already deposited £20000 with them this tax year, they might block any further deposits, not knowing that you had withdrawn from a flexible ISA elsewhere. I imagine some ISA providers may take a while to catch up with this.

Since (even if my interpretation of the change is correct) the ability to replace the money is limited to this year subscriptions there will still be a limit of £20k that be added. Although having said that, maybe there could be some interest from that money too??

This link is a bit easier to read, and confirms that only this years subscriptions can be taken from one flexible ISA, and added back into another one.
Individual Savings Account and Child Trust Funds — (Amendment) Regulations 2025 - GOV.UK

Although it does not appear to mention a date when this new situation will start.
Although looking at the info from Coventry BS in the OP, it seems to have started already.

Good find.

"Changes to the rules relating to withdrawals of a current year ISA subscription from a flexible account will allow individuals to subscribe withdrawn funds to another ISA within the same tax year, with no additional restrictions on the ‘replacement’ of those funds." seems pretty clear.

https://www.legislation.gov.uk/uksi/2025/733/regulation/1/made

says "Regulation 4 comes into force on 6th April 2027 and has effect in relation to the tax year 2027-28 and subsequent tax years. The rest of these Regulations come into force on 15th July 2025." The flexible ISA change being regulation 5 it came into effect on 15 July 2025.

clairec666

I can't yet figure out whether this makes ISAs simpler, or unnecessarily complicates them even more!

eskbanker

clairec666 said:

I can't yet figure out whether this makes ISAs simpler, or unnecessarily complicates them even more!

As pointed out in the other thread, it's effectively just returning to the rules applicable prior to April 2024.