ISA Flexibility Rules - current and previous tax years

ro1892

After reading

https://www.moneysavingexpert.com/savings/flexible-isas/ I've interpreted it as for flexible ISAs:

- If you take out money added in the current tax year you can repay it back (within the current tax year) to any ISA 

- If you take out money added in a previous tax year you can repay it back (within the current tax year) to that ISA only

Let's say I added 20k into a stocks and shares ISA in tax year 2024-25 and I've added another 10k in the  current tax year (2025-26). If I take out 15k am I right in thinking I could pay 10k (this tax years payment) into a new ISA and 5k (some of last tax years payment) back into the s&s ISA before the end of this tax year?

Is there any restriction that says for this year's allowance you must put it in the same type of ISA that you withdrew from (in this case s&s), or could I withdraw and pay into a new cash ISA without it being classed as a withdrawal and new money? 

How does flexibility work when you withdraw all of this year's allowance plus some of a previous years? If I withdrew the 15k in my example but only paid back in 5k is this 5k of the current year allowance or my previous year? 

slinger2

When you withdraw money from a flexible ISA it is first treated as being from the current year's subscription (assuming there is some). When that's used up you'll start withdrawing previous year's money. So if you got £10k of old money and £10k of new money and you withdraw £15k that'll be the £10k of new money and £5k of old money.

The situation reverses if you replace it. It'll first be regarded as a replacement of previous year's money (assuming there is some) and after that it'll replace this year's subscription. So to carry on the previous example, if you pay £6k back in, that'll be the £5k replacement of old money and £1k of new money. If you'd put £16k in, that would the £5k of old money, the £10k replacement of new money and £1k of new subscription.

It can all get pretty complicated. It might be simpler to keep new and old money in separate accounts. That way there's less possible confusion.

eskbanker

ro1892 said:

Let's say I added 20k into a stocks and shares ISA in tax year 2024-25 and I've added another 10k in the  current tax year (2025-26). If I take out 15k am I right in thinking I could pay 10k (this tax years payment) into a new ISA and 5k (some of last tax years payment) back into the s&s ISA before the end of this tax year?

Yes.

ro1892 said:

Is there any restriction that says for this year's allowance you must put it in the same type of ISA that you withdrew from (in this case s&s), or could I withdraw and pay into a new cash ISA without it being classed as a withdrawal and new money?

The latter.

Albermarle

It can all get pretty complicated. It might be simpler to keep new and old money in separate accounts. That way there's less possible confusion

For this reason it is recommended to check afterwards that everything has worked as it should.

ro1892

If previous years money is replaced first, how is it possible to deposit the current year's money in a different ISA?

In the example where I withdraw 15k (10k from this tax year and 5k from the previous tax year), I want to put the 10k (from this tax year) into a new (different) ISA but because the rules state previous years money is replaced first, this 10k would end up being 5k from the previous year and 5k from the current tax year (and I'm not allowed to put any previous years withdrawals into a different ISA).

Albermarle

ro1892 said:

If previous years money is replaced first, how is it possible to deposit the current year's money in a different ISA?

In the example where I withdraw 15k (10k from this tax year and 5k from the previous tax year), I want to put the 10k (from this tax year) into a new (different) ISA but because the rules state previous years money is replaced first, this 10k would end up being 5k from the previous year and 5k from the current tax year (and I'm not allowed to put any previous years withdrawals into a different ISA).

You have not interpreted the rules quite right.

You can put the £10K into a new ISA at any time  and it will count as new contributions.

It is only when you replace money in the existing ISA, that the money will go into the previous year first.

When you put the £5K back into the old ISA, it will replace the £5K of previous years subscriptions that you withdrew.

The timing does not matter as long as it is all in the same tax year.

leosayer

Albermarle said:

For this reason it is recommended to check afterwards that everything has worked as it should.

Indeed. 

I had an issue with Vanguard not reflecting my full flexible ISA allowance earlier this year. They promptly fixed it but only after I asked them to.

slinger2

ro1892 said:

If previous years money is replaced first, how is it possible to deposit the current year's money in a different ISA?

In the example where I withdraw 15k (10k from this tax year and 5k from the previous tax year), I want to put the 10k (from this tax year) into a new (different) ISA but because the rules state previous years money is replaced first, this 10k would end up being 5k from the previous year and 5k from the current tax year (and I'm not allowed to put any previous years withdrawals into a different ISA).

The rules I gave above only apply to a specific flexible ISA, not to your entire ISA holdings. So you can put £10k in a new ISA and that will be regarded as this year's money. You can also replace the £5 into the original account. As noted above these could be done in either order.