Change to the Flexible ISA Regulation (5DDB) dated 15 July 2025

masonic

Malchester said:

So does this change mean I can do an ISA transfer by taking it out of a flexible ISA and at a later date pay it into a different ISA? How will this be monitored? If I deposit £10k into an ISA how will it be proven it is from a flexible ISA?

HMRC has continued to only request net subscription figures for flexible ISAs, so if you add £10k, then later in the tax year flexibly withdraw it all, the provider would report a zero for that ISA.

jimjames

masonic said:

Malchester said:

So does this change mean I can do an ISA transfer by taking it out of a flexible ISA and at a later date pay it into a different ISA? How will this be monitored? If I deposit £10k into an ISA how will it be proven it is from a flexible ISA?

HMRC has continued to only request net subscription figures for flexible ISAs, so if you add £10k, then later in the tax year flexibly withdraw it all, the provider would report a zero for that ISA.

That still seems ripe for abuse so I suspect they will need to change rules at some point to include dates. Extreme example but pay £20k into 2 ISAs on 6th April, remove £20k from one ISA on 4th April next year and the total reported to HMRC will still be £20k not £40k that has been in the accounts for the majority of the year.

masonic

jimjames said:

masonic said:

Malchester said:

So does this change mean I can do an ISA transfer by taking it out of a flexible ISA and at a later date pay it into a different ISA? How will this be monitored? If I deposit £10k into an ISA how will it be proven it is from a flexible ISA?

HMRC has continued to only request net subscription figures for flexible ISAs, so if you add £10k, then later in the tax year flexibly withdraw it all, the provider would report a zero for that ISA.

That still seems ripe for abuse so I suspect they will need to change rules at some point to include dates. Extreme example but pay £20k into 2 ISAs on 6th April, remove £20k from one ISA on 4th April next year and the total reported to HMRC will still be £20k not £40k that has been in the accounts for the majority of the year.

Yes, the previous assumption had been that the restriction was imposed to prevent this sort of abuse, but no steps were taken to allow HMRC to detect it even with the rule in place. Now they've dropped it, it becomes questionable whether such abuse is even on their radar. If you could find enough flexible ISAs, you could subscribe hundreds of thousands in a single tax year providing you took the vast majority out for a few days between tax years.

Had they kept the restriction in place, all they would have needed to do was ask providers to report the net subscriptions alongside the maximum subscriptions during the tax year. The latter being used to check against the overall limit.

the_goon

OK, this all seems quite complicated.
I have an ISA from last year with 10k in. I have withdrawn 5k from it THIS year.
I want to transfer this ISA to a different provider.
Do I need to out the 5K back in before I transfer it, so I don't lose my full allowance? I'm thinking if I put 5k back in and then transfer it, my allowance will be back to 20k. But if I transfer it without first putting the 5k in, my allowance will be the standard 20k and I'd lose the ability to also deposit the 5k back?

masonic

the_goon said:

OK, this all seems quite complicated.
I have an ISA from last year with 10k in. I have withdrawn 5k from it THIS year.
I want to transfer this ISA to a different provider.
Do I need to out the 5K back in before I transfer it, so I don't lose my full allowance? I'm thinking if I put 5k back in and then transfer it, my allowance will be back to 20k. But if I transfer it without first putting the 5k in, my allowance will be the standard 20k and I'd lose the ability to also deposit the 5k back?

Yes, money flexibly withdrawn from a previous tax year must be replaced before a transfer to avoid losing the ability to replace it without it coming out of this year's allowance. This has always been the case and remains so.

Kim_13

the_goon said:

OK, this all seems quite complicated.
I have an ISA from last year with 10k in. I have withdrawn 5k from it THIS year.
I want to transfer this ISA to a different provider.
Do I need to out the 5K back in before I transfer it, so I don't lose my full allowance? I'm thinking if I put 5k back in and then transfer it, my allowance will be back to 20k. But if I transfer it without first putting the 5k in, my allowance will be the standard 20k and I'd lose the ability to also deposit the 5k back?

Yes, the replacement needs to be done before the transfer, as it is prior year money that you are replacing.