Flexible ISA's redundant

gesdt50

Hi all, having a so called flexible ISA with Zopa, they say that it's not going to be allowed to transfer part of the ISA to another provider, however if you do a full transfer they will close the account; they say they will accept partial transfers in so that's why it is a flexible ISA.

This can't surely be right, as all flexible ISA providers can & if not already will be doing the exact same thing as it's monkey see monkey do with most of these companies and effectively rules Flexible ISA's redundant?

Section62

A 'flexible ISA' means you can withdraw money from that account and pay it back in to the same account within the same tax year and not lose your ISA allowance.

If you want to transfer an ISA to a different provider then you ask the new provider to organise the transfer - you don't withdraw the money yourself unless you aren't worried about loss of ISA allowance.

Therefore the flexibility rules aren't relevant to transfers - with the exception that you have to put the funds back into the flexible ISA before doing a full transfer, otherwise you lose the remainder of the ISA allowance.

Banks and building societies can set some of their own rules for ISA accounts, but shouldn't use words like 'flexible' to describe account features as this can cause confusion. An ISA isn't 'flexible' because partial transfers-in are allowed, it sounds like someone at Zopa doesn't understand how flexible ISAs work.

eskbanker

A 'flexible ISA' means you can withdraw money from that account and pay it back in to the same account within the same tax year and not lose your ISA allowance.

The stipulation about paying back into the same account only applies to withdrawals of prior year money; flexibly-withdrawn current year money can go into any ISA.

gesdt50

"flexibly-withdrawn current year money can go into any ISA." The above statement would surely have to be set out by the regulator FCA and without checking more small print today I don't believe this is set out by the FCA

Also if providers can just make up rules then there will be no stopping them and boy will they come up with some!

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81877096#Comment_81877096

The flexibility rule stated above is set out both in legislation and the HMRC guidance:

https://www.legislation.gov.uk/uksi/1998/1870/regulation/5DDB

The withdrawal of previous year funds from a flexible ISA can only be replaced in the account from where the withdrawal was made and must be replaced in the same tax year.

The withdrawal of current year subscriptions from a flexible ISA automatically reduces the net subscription to that ISA meaning that additional subscriptions can be made to other ISAs (flexible or non-flexible) in the remainder of that tax year.

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

ISA providers do have plenty of leeway to interpret the rules by introducing additional constraints, regardless of whether you believe that or consider it a good thing.

Section62

eskbanker said:

The stipulation about paying back into the same account only applies to withdrawals of prior year money; flexibly-withdrawn current year money can go into any ISA.

For completeness, AIUI the current year rule only applies to subscriptions. If the withdrawn amount included money from income/growth then the income/growth part has to go back to the same account it was withdrawn from.

jifmoose

https://forums.moneysavingexpert.com/discussion/comment/81877150#Comment_81877150

This is of interest to me as I have a flexible Cash ISA with Trading 212, with 20K subscriptions only from this year. To avoid the (notoriously slow/unreliable?) ISA transfer process from Trading212, I am very tempted to withdraw all this money plus the ~£600 interest it's garnered before April (soon after which my promo rate expires) and manually pay it into a different ISA with a better rate.

My presumption was this was OK as it's from the same year - but would it actually be the case that I could only do this for the original £20K, and the ~£600 would have to wait until the ISA allowance was refreshed after April?

masonic

https://forums.moneysavingexpert.com/discussion/comment/81877555#Comment_81877555

Yes, you'd be limited to the maximum annual allowance of £20k, as mentioned by @Section62 in the post above yours.

Eco_Miser

https://forums.moneysavingexpert.com/discussion/comment/81877555#Comment_81877555

The only way to move the ~£600 and keep the tax-free status would be an ISA transfer, as it is not a subscription in the current year, and will be prior year money after April 5th, as in the rules quoted by eskbanker.

elkiedee

If you've put in 20K to the ISA this tax year, 25/26, you've used your ISA allowance, and if you just take it out manually,

1. your money would be treated as a new subscription and you won't be able to do it in a different ISA before the start of the next tax year, because you've already put in £20K

2. In April 2026, you'll be able to put 20K in, and not £20,600 - your subscription plus your interest - and this is the last year you'll be able to put in up to £20K - next year it will be £12K (how much this matters depends on how much you have available to add to your savings, but I have the impression from your post that this might affect you more than me - a lot of my savings money is from some years ago and most additional money this year will be added interest not extra savings from income.

3. So you need to choose where you want to move your money to and ask the new provider to do a transfer, or decide to leave it where it is. If you do decide to withdraw it and put it into another account, wait until you can put that money into its new home to do so, and don't withdraw more than you can pay into another ISA, or you might lose more money in lost interest and potential ISA savings than through delays in transfer.

This could be a different existing ISA account which accepts transfers in, or a new account. Each provider/account can set other restrictions - some of these may be connected to ISA rules but some aren't.

I've had good, bad and excellent experiences with transfers - 3 from ISA 1 (not a very good rate, unlimited instant access via my current account) and 1 from ISA 2 (not the best rate but much better than ISA 1, triple access and I know I can access it fairly quickly if I need to), all to ISA provider 3 - two slightly different ISAs as their best accounts often go NLA and last year I realised they were advertising a different rate to the one I was getting, and I could open a better ISA account and switch my money within permitted withdrawals for slightly higher interest. The bad experience did put me off applying for a transfer of a much bigger sum of money but I decided to for it when the ISA provider 2 one year account matured - I split the money about 78/22% between provider 3 (ISA transfer application) and a new triple access ISA with provider 2 (online account application and move the money immediately, all automated online processes.

jifmoose

Thanks, yep makes sense. Depending on how much hassle Trading212 makes it to transfer out - not sure if things are smoother now or still requires a paper process - I'll leave the ~£600 behind in the original ISA and transfer it using the formal process later.