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.

FishInGlass

Having been alerted to this in the Cash ISA thread I spotted this on investigation.

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

Regulation 4 comes into force on 6th April 2027 and has effect in relation to the tax year 2027-28 and subsequent tax years. 

No impact therefore on the current tax year.

eskbanker

FishInGlass said:

Having been alerted to this in the Cash ISA thread I spotted this on investigation.

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

Regulation 4 comes into force on 6th April 2027 and has effect in relation to the tax year 2027-28 and subsequent tax years. 

No impact therefore on the current tax year.

But the flexibility changes are regulation 5, not 4, and "The rest of these Regulations come into force on 15th July 2025"....

Sea_Shell

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.

Wow.

I just put the above bold into Google and it does seem to be a huge potential loophole.

So if you had "new" £20k in a second flexible ISA for 11 months and then withdrew it before the end of the tax year, it will be reported as ZERO subscribed?!?

However, I'm sure the declaration you tick would be to confirm that you WON'T do this and over-subscribe.

(ETA - Subscription Limit Agreement: It states that "the investor will not subscribe to more than the annual ISA allowance in a given tax year."  So, if by the end of the tax year your NET subscriptions are within £20k, you haven't technically breached this?)

It makes me less twitchy about accidentally going over between multiple flexible ISAs, as long as they end the tax year with max £20k new money in, overall.

eskbanker

Sea_Shell said:
ETA - Subscription Limit Agreement: It states that "the investor will not subscribe to more than the annual ISA allowance in a given tax year."  So, if by the end of the tax year your NET subscriptions are within £20k, you haven't technically breached this?

My interpretation would be that if your current year subscriptions exceed £20K at any point in the tax year then technically you've breached that, even though it's possible to undo it by the end of the year.