Flexible ISA Question

throughtheblue

I have a Cash ISA with trading 212 but the bonus rate finished some months ago. I can't tale advantage of other offers like Moneybox or Plum as I've had previous ISA's with them. 

My Trading 212 ISA I have only had since the start of this new tax year. It's compromised of amounts from 2 previous tax years and a current tax year. As it's a flexible ISA, am I able to take out the whole sum, as I plan to put 4k in Santanders saver at 6% and the rest in Chase's saver at 4.5%, and then return it to the trading 212 before the end of this tax year? 

I've worked out now that the interest earnt shouldn't take me over the annual allowance, but will allow me to leverage more interest this way for the remainder of the tax year.

flaneurs_lobster

REMOVED MY ERRONEOUS POST  - I've clearly misunderstood the rules around removing/replacing funds into a flexible ISA.

Apologies.

xylophone

but only new (this tax year) funds can be replaced and remain within the tax-free wrapper.

Are you sure of this?

https://www.moneysavingexpert.com/savings/flexible-isas/

Taking this to its extreme, there's a nifty trick you could use to keep your money tax-free forever in an ISA while getting a higher interest rate for most of the year.

Let's say you have £50,000 in flexible ISAs, but other savings accounts pay higher interest that you want to take advantage of, and you don't want to lose your ability to keep £50,000 tax-free year after year as you can in a cash ISA. Plus remember the personal savings allowance means you can earn up to £1,000 in interest in non-ISA savings accounts each financial year tax-free.

Here's how:

1. At the start of the new tax year – so from 6 April – withdraw the ISA cash.

2. Put it in (several) high interest accounts (see our Top savings guide for the best deals).

3. Before 5 April the following year just put it back in the ISA to keep your tax protection.

4. Repeat the process again and again.

This means your money would be earning more interest for most of the year, whilst still keeping the long-term benefits of an ISA.

Ch1ll1Phlakes

throughtheblue said:

I have a Cash ISA with trading 212 but the bonus rate finished some months ago. I can't tale advantage of other offers like Moneybox or Plum as I've had previous ISA's with them. 

My Trading 212 ISA I have only had since the start of this new tax year. It's compromised of amounts from 2 previous tax years and a current tax year. As it's a flexible ISA, am I able to take out the whole sum, as I plan to put 4k in Santanders saver at 6% and the rest in Chase's saver at 4.5%, and then return it to the trading 212 before the end of this tax year? 

I've worked out now that the interest earnt shouldn't take me over the annual allowance, but will allow me to leverage more interest this way for the remainder of the tax year.

You can withdraw any and all ISA funds as long as they returned to the ISA wrapper before the end of the tax-year. It does not matter which TY they come from. 

So you're idea is perfectly fine. Just make sure to set a reminder at the start of April to remind yourself to move the funds back.

This article from Moneyfactscompare explains it quite well and does the MSE article on this as linked in a previous post
 What is a Flexible ISA? How Does it Work? | Moneyfactscompare

xylophone

 It's compromised of amounts 

It comprises amounts....?

Northern_Wanderer

xylophone said:

Taking this to its extreme, there's a nifty trick you could use to keep your money tax-free forever in an ISA while getting a higher interest rate for most of the year.

Let's say you have £50,000 in flexible ISAs, but other savings accounts pay higher interest that you want to take advantage of, and you don't want to lose your ability to keep £50,000 tax-free year after year as you can in a cash ISA. Plus remember the personal savings allowance means you can earn up to £1,000 in interest in non-ISA savings accounts each financial year tax-free.

Here's how:

1. At the start of the new tax year – so from 6 April – withdraw the ISA cash.

2. Put it in (several) high interest accounts (see our Top savings guide for the best deals).

3. Before 5 April the following year just put it back in the ISA to keep your tax protection.

4. Repeat the process again and again.

This means your money would be earning more interest for most of the year, whilst still keeping the long-term benefits of an ISA.

I want to do this (withdraw from flexible ISA to a higher rate paying savings account and will pay it back to the ISA before April 5th) but a bit confused how to calculate interest as we are around half way through the tax year.

I don't want to go over my £1000 taxc free interest allowance. I have approx earned £154 in interest so far non ISA account. 

How much ISA money can I put in a 4.45% savings account from now to 5th April to stay under my £1000 tax free interest allowance? How does one work that out? There must be a formula?

Is this right? £45000 x 4.45% = £2002.50

£2002.50/12 = £166.87 per month

£166.87 x 5 months = £834.38 interest

Will I be safe with that?

surreysaver

Why don't you want to go above your PSA? 80% of 6% is more than 100% of 4%

clairec666

Northern_Wanderer said:

I don't want to go over my £1000 taxc free interest allowance. I have approx earned £154 in interest so far non ISA account. 

How much ISA money can I put in a 4.45% savings account from now to 5th April to stay under my £1000 tax free interest allowance? How does one work that out? There must be a formula?

Is this right? £45000 x 4.45% = £2002.50

£2002.50/12 = £166.87 per month

£166.87 x 5 months = £834.38 interest

Will I be safe with that?

Yes, as a rough guide, your calculations should work.

However as @surreysaver says, you could gain more interest despite paying some tax on it. Remember, if you go over the £1000 allowance, you only pay tax on the excess, not on the whole £1000.

clairec666

Northern_Wanderer said:

I don't want to go over my £1000 taxc free interest allowance. I have approx earned £154 in interest so far non ISA account. 

How much ISA money can I put in a 4.45% savings account from now to 5th April to stay under my £1000 tax free interest allowance? How does one work that out? There must be a formula?

Is this right? £45000 x 4.45% = £2002.50

£2002.50/12 = £166.87 per month

£166.87 x 5 months = £834.38 interest

Will I be safe with that?

Yes, as a rough guide, your calculations should work.

However as @surreysaver says, you could gain more interest despite paying some tax on it. Remember, if you go over the £1000 allowance, you only pay tax on the excess, not on the whole £1000.