Flexible ISA question

liger

Question about ISA flexibility:  I understand how flexible ISAs work but I'm unsure about what happens when you do transfers to and from flexible ISAs.  I opened a Monument Flexible ISA this year with contributions from this tax year.  I then did an ISA transfer from Monument to a Kent Reliance ISA which is Non-Flexible when Monument dropped to 4% so I now longer have the flexiblity feature with the contributions in Kent Reliance.  I am now thinking about doing an ISA transfer from Kent Reliance to an existing Virgin Money Exclusive 3 Flexible ISA.  Will the contributions from this tax year have flexibility after they arrive in the Virgin Exclusive 3 Flexible ISA?

masonic

Yes, flexibility depends on the current product the money is held in, not its history.

Redwinelover

I understand that with a flexible isa you can withdraw money without affecting your allowance provided you replace it in the same tax year. However, if you deposit 2k then withdraw it, without replacing it, I assume the allowance reduces by £2k? 

slinger2

Strictly speaking a withdrawal from a flexible ISA has nothing to do with your annual allowance. You simply have the ability to "replace" that money (in the same tax that you withdrew it) without it counting towards your allowance. If the withdrawn money was from this tax year you can replace it in a different ISA. If the withdrawn money was from an earlier tax year you can only replace it in the ISA you withdrew it from.

masonic

Redwinelover said:

I understand that with a flexible isa you can withdraw money without affecting your allowance provided you replace it in the same tax year. However, if you deposit 2k then withdraw it, without replacing it, I assume the allowance reduces by £2k? 

Not under the current rules. If you deposit £2k, then your allowance reduces to £18k. If you flexibly withdraw it, then effectively you regain your £20k allowance. You can replace current year subscriptions in any ISA, so you have £20k to use anywhere you like. If you don't re-use the £2k by the end of the tax year, then you lose all £20k and get a fresh £20k allowance for the next tax year.

If withdrawing £2k originally paid in during a previous tax year, then this is separate to your current year £20k allowance and must be replaced in the same ISA before the end of the tax year or you lose that £2k replacement allowance and would just have the new £20k allowance in the next tax year.

Redwinelover

The flexible isa had money in it from previous tax years, but the only transaction this tax year was the 2k I deposited in May, which I then withdrew 2 months later. I transferred that isa to a new fixed cash isa a few days ago. I also transfered another isa to the fixed rate isa a couple of days ago - but I hadn't made any transactions at all for this tax year on that one. So I expected to have either a full 20k allowance left (or 18k, if you take off the 2k deposit/withdrawal). I did not expect my new fixed isa to say I'd used over 19k of this years allowance after transfering the 2 isas into it. 

masonic

You are now responding to the same points by the same people over two different threads started by other people about different issues. This is bad forum etiquette and will lead to confusion. I have responded in the other thread: https://forums.moneysavingexpert.com/discussion/comment/81788244/#Comment_81788244

Redwinelover

masonic said:

You are now responding to the same points by the same people over two different threads started by other people about different issues. This is bad forum etiquette and will lead to confusion. I have responded in the other thread: https://forums.moneysavingexpert.com/discussion/comment/81788244/#Comment_81788244

I responded here as well because 2 people replied and I wasnt sure if they would have seen the question on the other thread.  Apologies for the school boy error and any confusion. I've now discovered how to bookmark the threads Ive commented on so should be able to avoid this happening in future.   👍

NannaGEO

@Redwinelover

I had a similar issue to yours recently after I transferred the balance of this years funds from my flexible ISA to my Fixed ISA. Before the transfer the fixed ISA account showed that I had a fair amount of my allowance left for this year, as I had deposited some new money and done an earlier transfer of money from the previous year.  After the last transfer something went wrong and my remaining allowance changed to zero. After several phone calls, speaking to advisers on the banks secure messaging and raising a complaint it was sorted out after 2 months, but not until I was able to send a copy of my statement from the flexible account. I couldn't send it sooner because it was impossible to get an email address. The complaint was escalated when I sent an email to the banks CEO, which I can highly recommend.

The bank issued an apology for the error and gave me £200 compensation for all the inconvenience and stress.

In the first instance I would check with your flexible ISA provider what they have told the new ISA provider and if they're not much help, like mine was you should get your statements which will show the balance at the end of the last tax year and any withdrawals you have made. 

As long as you only had previous years money in the ISA's when you did the transfer you should have your full 25/26 allowance available to deposit in any ISA you choose.