Personal loan to avoid losing ISA allowance

Cultura82

Dear all,

I have finally paid my mortgage and I used about £40k from my cash ISA account.

At the moment, the ISA provider is showing me that I can put back £40k however I will lose this opportunity when the new financial year starts (06/04/2026).

I was wondering of borrowing some money, likely a personal loan, just a few days before the current financial year ends, move the money into my ISA (so I do not lose my current extra allowance), wait until the new financial year starts, taking the money out of the ISA and then repay my loan.

If timed rightly (and picked the right loan that I can repay after a few days), this plan should allow me to retain extra £40k allowance for next financial year at a reasonable price, right?

Do you guys think this plan can work? would it be legal?

Thanks!

Peter999_2

I'm a bit confused. The yearly ISA allowance is only £20,000, so where would the £40,000 come from - or is this your partner as well?

Am I right in thinking you want to put the £40,000 in before 5th April as you haven't put anything else into an ISA this tax year (2025/2026)?

You'd need to tell us if you are currently a tax payer, and whether you get more than the £1,000 interest a year from non-ISA interest.

molerat

With a flexible ISA you can withdraw as much as in there from any year, so £100K if you have it, and pay it back in within the tax year. I have dipped into previous year's contributions and paid them back in without affecting this year's allowance, it's the way flexible ISAs work. My account shows I have paid £23850 into the ISA this year and still have £3650 available which means I have withdrawn £7500 of previous year funds and paid them back in.

As to OP's question, if you can make it work then why not, no rules to prevent it.

Woodstok2000

WIll you actually need a £60k isa allowance next year? The plan can definitely work, and nothing illegal about it, but its only worth considering if youve got more than £20k to pay into the isa in the next tax year.

You also need to think about the cost. For example, £40k invested at 5% would net you £2k interest, so £400 in tax outside an isa. If the loan will cost more than that to pay off, then its not worth it.

fwor

I can't see any reason why it would be illegal, but the practical issue could be whether you can find a lender willing to lend you £40k for the reason that you would have to "invent" to make it possible.

If you declare the purpose of the loan as "investment" they will probably decline.

QrizB

In principle it should work.

In practice, £40k is quite a large loan; are you sure you'll qualify for one? Also check the early repayment terms before taking the loan.