Flexible ISA Replacement Rules Confusion

slinger2

clairec666 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had already deposited £20000 with them this tax year, they might block any further deposits, not knowing that you had withdrawn from a flexible ISA elsewhere.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??

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?

The other part of the new regulation is that it says "No withdrawal under paragraph (1) may reduce the current year’s subscription amount to less than nil.” What this means (I think) is that if you subscribed £20000, gained £100 interest, then withdraw £20100, you'd have a zero subscription in that account, it can't go to -£100. So you'd be limited to replacing £20,000 in other ISAs, otherwise you'd go over the £20k limit.

Albermarle

slinger2 said:

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had already deposited £20000 with them this tax year, they might block any further deposits, not knowing that you had withdrawn from a flexible ISA elsewhere.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.

Having read again the link I posted, it does in fact mention 15th July as the start date

slinger2

clairec666 said:

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

I suppose it makes "flexibility" more attractive, since you can easily switch this year's money around different easy access flexible ISAs. Having said that, I had to check where my 25/26 allowance was. £10k in 1-year fixes and £10k in a non-flexible ISA (Moneybox). So not much use to me unless I transfer my non-flexible ISA to a flexible one.

Sea_Shell

I've just seen this thread.

Does the account your moving the money to, also have to be flexible, not just the one your withdrawing from?

So you could have it in say a flexible EA (T212) account, and then moved it all to a 12 month fixed just before the end of the tax year?

slinger2

Sea_Shell said:

I've just seen this thread.

Does the account your moving the money to, also have to be flexible, not just the one your withdrawing from?

So you could have it in say a flexible EA (T212) account, and then moved it all to a 12 month fixed just before the end of the tax year?

I think the answer is no, the new one doesn't have to be. What's important is that the old one is. That way your withdrawal is taken off the allowance that you've used, making it available to be replaced elsewhere.

eg £20k added to flexible ISA, withdraw £15k, you've now only used £5k of your allowance in that account leaving £15k to go into other ISAs. If the original ISA was not flexible you'd still have used all your allowance, even after withdrawing the £15k. You could, of course, transfer it to a flexible ISA and go from there.

As noted elsewhere the allowance used by your flexible ISA can't go negative. eg £20k added, £1k interest credited, withdraw £21k. You can only put £20k in other ISAs.

Worth noting that some fixed-rate/fixed-term products are flexible. You'll pay a fee for withdrawing but you can replace that money later in the same tax year.

surreysaver

So, any interest earned in a flexible ISA, if withdrawn, has to be returned to the original ISA? 
I love how they change the rules part way through the tax year. Last year they changed them at the beginning, but didn't actually tell anyone until part way through the year!

clairec666

slinger2 said:

Worth noting that some fixed-rate/fixed-term products are flexible. You'll pay a fee for withdrawing but you can replace that money later in the same tax year.

Yes. It's rare, but Barclays for example have a flexible limited withdrawal account that is also fixed rate 

Albermarle

surreysaver said:

So, any interest earned in a flexible ISA, if withdrawn, has to be returned to the original ISA? 
I love how they change the rules part way through the tax year. Last year they changed them at the beginning, but didn't actually tell anyone until part way through the year!

I do not think so.
If the total amount withdrawn, including interest, is less than £20k, then you could just take it all out and put all of it in another isa
If it was £20k + interest, you could leave the interest behind ( if the isa provider allowed part transfers) or withdraw it all and just keep the interest and put £20k in a new isa.
I think that is right…

surreysaver

Albermarle said:

surreysaver said:

So, any interest earned in a flexible ISA, if withdrawn, has to be returned to the original ISA? 
I love how they change the rules part way through the tax year. Last year they changed them at the beginning, but didn't actually tell anyone until part way through the year!

I do not think so.
If the total amount withdrawn, including interest, is less than £20k, then you could just take it all out and put all of it in another isa
If it was £20k + interest, you could leave the interest behind ( if the isa provider allowed part transfers) or withdraw it all and just keep the interest and put £20k in a new isa.
I think that is right…

But if an ISA isn't allowed to go minus contributions, and I took out subscriptions plus interest, then my year's contribution would then appear to be more if I were to put those contributions plus interest back into the same ISA?

slinger2

surreysaver said:

Albermarle said:

surreysaver said:

So, any interest earned in a flexible ISA, if withdrawn, has to be returned to the original ISA? 
I love how they change the rules part way through the tax year. Last year they changed them at the beginning, but didn't actually tell anyone until part way through the year!

I do not think so.
If the total amount withdrawn, including interest, is less than £20k, then you could just take it all out and put all of it in another isa
If it was £20k + interest, you could leave the interest behind ( if the isa provider allowed part transfers) or withdraw it all and just keep the interest and put £20k in a new isa.
I think that is right…

But if an ISA isn't allowed to go minus contributions, and I took out subscriptions plus interest, then my year's contribution would then appear to be more if I were to put those contributions plus interest back into the same ISA?

I'm finding this issue a bit confusing.

The regulation does say that the "current year’s subscription” includes "the qualifying investments and other proceeds (including income) representing the subscriptions in sub-paragraphs (a) and (b) of this definition;" ((a) and (b) being the current year's money you've subscribed or transferred in). So, on that basis, you'd think that the "current year’s subscription” would include interest on this year's money (for a Cash ISA).

However the new regulation is quite clear: "No withdrawal under paragraph (1) may reduce the current year’s subscription amount to less than nil." So, suppose you've got an ISA with only this year's money (£20k say) in it, plus £1k interest from that. If you withdrew all £21k your allowance used would drop to zero, and I'm assuming they'd only let you pay £20k back in.

The situation would be different if the ISA contained old money. The £21k might then be treated as £20k of new money and £1k of old money, I suppose, and all of it could be "replaced" back into the same ISA.