Withdrawing from flexible ISAs and annual allowance

mjstephens2001

Hi,
Can I please check if money withdrawn from this year's ISA subscription in a flexible ISA still contributes to the £20k cap?

I have a flexible Zopa ISA, funded this tax year. I also have a Plum ISA (non-flexible). At the start of the tax year I put £5k in Zopa, and have also funded £15k to the Plum ISA (so total £20k, maxing out my allowance).

Can I now take money out of Zopa and add to Plum? E.g. If I withdraw £4k from Zopa and add it to Plum, does this mean:
a) I will have funded Zopa £1k this tax year, and Plum £19k (=£20k total), or
b) I will still have funded Zopa £5k, but also funded Plum £19k (=£24k total)?

I understand also that I can dip into previous years' money in the flexible Zopa ISA, but this doesn't affect this years allowance?

TIA

Ayr_Rage

You have used your annual allowance, £5k to Zopa and £15k to Plum.

Money withdrawn from a flexible ISA, Zopa in your case, can only go back into that same ISA according to the latest rules.

You CANNOT add it to your Plum ISA this tax year.

eskbanker

Ayr_Rage said:

You have used your annual allowance, £5k to Zopa and £15k to Plum.

Money withdrawn from a flexible ISA, Zopa in your case, can only go back into that same ISA according to the latest rules.

You CANNOT add it to your Plum ISA this tax year.

The rules on this were changed back to the previous iteration in July, so flexibly-withdrawn current year (only) money can now be paid back into any ISA again:

https://forums.moneysavingexpert.com/discussion/6624336/change-to-the-flexible-isa-regulation-5ddb-dated-15-july-2025

However, the main gov.uk page doesn't appear to reflect the legislative change, despite the document history saying that it was updated at the same time:

https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#flexible-isas

Catplan

Can you transfer it it Zopa to Plum, you’d need to ask Plum

t0rt0ise

NannaGEO said:

Unfortunately the flexible ISA providers haven't grasped this and are still quoting on their websites that any funds withdrawn can only be paid back to the same account. They are still saying that in order to keep the full years allowance funds have to be transferred. I followed this and they closed my account and somewhere between them and the receiving bank they've still mucked up my remaining allowance. No doubt they will blame me and each other. 

If I had been aware about this guidance I would have just withdrawn the money I wanted to put in my other ISA. They wouldn't have closed my account and the new bank wouldn't have had the opportunity to muck up.

In what way have they messed up? It doesn't matter what they think your remaining allowance is as long as you know it, and as long as they don't think you've got less allowance left than you want to pay in, which I doubt they'd do after a simple transfer.

eskbanker

NannaGEO said:

Unfortunately the flexible ISA providers haven't grasped this and are still quoting on their websites that any funds withdrawn can only be paid back to the same account. They are still saying that in order to keep the full years allowance funds have to be transferred. I followed this and they closed my account and somewhere between them and the receiving bank they've still mucked up my remaining allowance. No doubt they will blame me and each other. 

If I had been aware about this guidance I would have just withdrawn the money I wanted to put in my other ISA. They wouldn't have closed my account and the new bank wouldn't have had the opportunity to muck up.

It's difficult to follow from that what actually happened, so you might find it worthwhile explaining more detail about which providers are involved, how much money was deposited/withdrawn/transferred, and when, etc....

eskbanker

NannaGEO said:

@eskbanker I don't need to explain in full what happened. As this matter is being dealt with by FOS I will not be naming and shaming the banks involved. All I will say is that I got compensation from one of the banks and the ombudsman has recommended that the other bank do the same. It appears that the sending bank are actually following the new rules, but they have not updated the information to customers. 

Of course you don't need to tell the whole story, but it does seem a bit pointless just to post about how one unnamed bank and another were involved in a flexible ISA mix-up of some sort - it's good that it's all sorted for you now, but the truncated and anonymised version of events doesn't really help others who might have found themselves in a similar situation....

eskbanker

NannaGEO said:

@eskbanker the point of my 'pointless' original post was to highlight the fact that a lot of flexible ISA providers have not changed the information on their websites to reflect the change. Although one particular bank has directly affected me, I have also checked the info provided by others and so far I have only found one that makes it clear that funds deposited in this tax year can be withdrawn and redeposited into another ISA either flexible of non flexible with them or another provider. 

Most just say you can put it back in before the end of the tax year, but fail to add the bit about being able to re-deposit it to another account. They also say that to keep the allowance it needs to be transferred. 

We all have to do our own checks on what our ISA providers are telling us and if we think they are wrong we need to challenge them.

Clearly individuals are responsible for their own checks, but if someone has taken the time to research the issue but chooses not to share the names of those who are alleged not to comply with the new rules, it seems odd not to share that in a meaningful way.

NannaGEO said:

The ISA provider that I have my issue with have taken the view that newsletter 17 and the guidance for ISA managers are guidance only and they have made a commercial decision not to change this. The ombudsman has agreed with them, but has also said they need to make it clear that they have made this decision.

Newsletter 17 simply reported the changes in the legislation, which aren't optional as such, so it's unclear why FOS would believe them to be:

The Individual Savings Account (Amendment) Regulations 2025

Providers can choose whether or not to offer flexible ISAs, but once doing so, they can't be selective about which aspects of flexibility they support.

NannaGEO said:

I will provide an update when I receive a final decision on my complaint, which hopefully won't be too long as they were given until yesterday to respond to the ombudsman opinion. 

Fair enough, look forward to seeing the rest of the story.

eskbanker

NannaGEO said:

2. Newsletter 17 does not say that this is a change in legislation. It states that it is clarification, which is not the same thing.

Assuming we're talking about the same thing, it very clearly does state that the reason for the newsletter is the fact that the legislation has changed!

1. Changes to regulations 

The Individual Savings Account and Child Trust Fund Regulations were laid before Parliament on 24 June 2025. These make several changes to the Individual Savings Account Regulations, which come into effect from 15 July 2025.

[...]

2. Individual Savings Account managers guidance updates

We will be updating the Individual Savings Account managers guidance to reflect updates to the Individual Savings Account Regulations which come into force on 15 July 2025. 

https://www.gov.uk/government/publications/tax-free-savings-newsletter-17/tax-free-savings-newsletter-17-july-2025

NannaGEO said:

3. Yes, providers can choose whether on not to offer a flexible ISA and that is what the FOS was referring to when they said the bank could set their own ISA commercial policies. They did not agree that they could ignore the HMRC clarification and should make it clear to customers if their product rules are different. 

While it's of course true that there's a difference between legislation and guidance, the point here is that it's the former that's changed, and the latter is being updated in accordance with it, so providers have no choice other than to comply with the amended legislation and even if they've mistakenly "taken the view that newsletter 17 and the guidance for ISA managers are guidance only", that doesn't exempt them from the legislative requirements linked previously.

In your case the provider from which the withdrawal was made must reduce your net current year subscription accordingly, thereby leaving you free to deposit those funds in another ISA - they don't have any right to control what you do with that money post-withdrawal.  This is regardless of what they happen to publish on their website, i.e. it's important to understand the distinction between what their publicity material says and what their legal obligations are, so failure to publish updated terms doesn't really matter as long as they actually comply with the regulations.

NannaGEO said:

There are some ISA's that are advertised as being flexible but when you dig into the terms and conditions they're a hybrid of fixed and flexible. eg some fixed will allow the flexibility of being able to deposit or transfer funds throughout the fixed period, but will not allow withdrawals or transfers without penalty. 

I think you're potentially blurring the use of the word 'flexible' here - in the context of ISAs, flexible status has a specific meaning, namely the ability to withdraw and replenish funds without these counting as new deposits.  The ability to transact during fixed terms might be described as 'flexible' in the vernacular mainstream sense of the word but has nothing to do ISA flexibility in terms of the scheme rules.


I'm not planning to respond to all of the other stuff in your latest post, we clearly disagree on the value of disclosing specifics instead of anonymised generalisations, so probably best to leave it at that.

NannaGEO

@t0rt0ise

Sorry that I couldn't go into more details when I posted my response to you, but it was the subject of a complaint to FOS and I did not want to jeopardise the potential outcome of my claim.

The receiving bank messed up because they recorded previous money transferred to them as current year funds, but they were from previous years. This meant that the transfer that resulted in my account being closed, wrongly showed on the receiving account that I had oversubscribed. This took a while to be sorted, but they accepted responsibility for the mess up and paid compensation.

My claim has now been settled after the FOS findings recommended that Virgin Money should pay me compensation and re open the account they closed. I was paid £200 compensation and they opened a new flexible ISA that replicates the one they closed. This took months of them coming up with all sorts of conflicting reasons why they were not in the wrong. Their excuses varied from saying that they had taken a commercial decision not to adopt the "new" rules to then saying that it wasn't a new rule and was clarification of the rules that had always been in place. They were saying this in spite of the key facts for the Flexible ISA they are still offering (M ACCESS ISA) saying that any money withdrawn from this account has to be replaced back into the same account. You can check this out yourself online.

After they had settled my claim I contacted their FOS team to ask for the terms and conditions of the replacement account they had opened and I asked them to confirm that this account could be managed in accordance with the clarified rules. To my dismay they emailed back saying as it was a direct replacement for the account they closed, nothing had changed. They also still maintained that any withdrawals from the Flexible ISA must be put back into the same account it was withdrawn from.

When I challenged them on this they said at the end of the tax year if all credits made have been withdrawn, they will report a zero net contribution. They also said that if I withdraw any funds from my flexible ISA to a current account and then move it to an ISA held externally, this would be a decision for me to make and does not form part of the conditions of their accounts.

They are basically saying that I have to take responsibility for any action I take without giving me the full, up to date rules.

Amazingly I received an email from Nationwide yesterday who will be completing the take over of Virgin Money in April, subject to court approval. This emailed provided an update to some of their savings T&C's which included changes to their cash ISA terms and conditions to reflect recent changes to Individual Savings Account Regulations 1998 i.e. the clarified rules on replacement of withdrawn funds.

I have, of course sent this to Virgin Money as they are misleading current and potential flexible ISA subscribers by continuing to say that funds must be returned to the same account.

Once the take over takes place Virgin ISA's will be managed by Nationwide and I have more confidence in them.

KneadtheDough

Can I wait till after 6 April this year, transfer my non-flexible ISA with this and previous years' subscriptions to a flexible ISA, withdraw all but, say £1, and then (should I be so lucky) put it all back in the same flexible ISA? Might I even open a new flexible ISA later in the year and put said funds there?