Flexible ISA switch funds to standard savings account?

RighteousDude

Hi All, I'm fairly new to ISAs and was toying with the following idea;

I currently have a non-flexible ISA with a few years allowance built up. Due to my present circumstances, most of my personal tax free allowance is available. I'm thinking that I could move to a flexible ISA, then transfer most of this into a regular account that earns higher interest than most ISAs, e.g. Chase 4.75% - reserving a balance of just over minimum - £1, or whatever to keep the ISA open.

I believe I'm correct in saying that this will preserve my accrued ISA allowance, provided I transfer back whatever I took out just before the end of the tax year. I can then presumably take it back out again mid April (?) to do the same after adding next year's £20k allowance, if the rates hold.

As I'm not paying tax on the interest anyway I might as well have the higher rate is my reasoning. Does that make sense, and can anyone see any potential issues?

FYI - yes, I'm doing my own research on S&S ISAs since listening to Martin's podcast and I expect to return to full time work in a few years (at which point the ISA wrapper will be a very useful place to earn untaxed interest), so not looking for any offers/advice on these subjects. Thanks

eskbanker

Yes, you can withdraw any amount from a flexible ISA and replenish it by the end of the same tax year without it counting towards current year contribution allowance, and some do indeed use this capability in order to earn a better return.

clairec666

Yes, what you're suggesting is do-able, and quite a good idea as you're not paying tax on interest. You say you're new to ISAs, but it sounds like you've got the hang of them already.

t0rt0ise

Sounds good in theory but how much extra will you save? A quick glance at the rates have me think it's not going to be much, if anything.