ISA flexibility: withdrawing current tax-year subscriptions and replacing elsewhere

octoask

Is my understanding of new government legislation correct?

I deposited £15k into a flexible ISA this tax year (bringing my allowance down to £5k)

I withdrew £15k from this ISA this tax year (restoring my allowance to £20k)

I can now deposit a total of £20k into ANY ISA of my choosing (not just the ISA I made the withdrawal from) this tax year.

The point being: ISA flexibility now allows for replacements of current-year withdrawals to happen in any ISA account, whereas previously the funds could only be returned to the account the money was withdrawn from.

Is that right?

eskbanker

Yes, that's right.

Edit: actually, slight correction or clarification: "ISA flexibility now allows for replacements of withdrawals of current-year withdrawals money to happen in any ISA account, whereas previously the funds could only be returned to the account the money was withdrawn from."

Rich2808

Another benefit is you can top up your flexible isa over the weekend to use your (full) 2025-26 allowance up - withdraw the cash on Tuesday and replace the funds when you have the cash longer term.

octoask

https://forums.moneysavingexpert.com/discussion/comment/81947541#Comment_81947541

Thank you for this.

I have today contacted 5 ISA providers and none recognise this. They all say that withdrawals of current-year money can only be returned to the ISA account the money was withdrawn from.

Do you know if this rule automatically applies all flexible ISAs or if its optional? Presumably it wouldn't work if it's optional (given the universality of the rule).

Could you also please help clarify my understanding of how replacing withdrawals of prior year deposits works with this rule?

This is my situation:

I deposited only £4k this tax year

Withdrew £4k this tax year (resetting allowance back to £20k regardless of provider?)

Withdrew £20,500 this tax year (money deposited in previous tax year)

Deposited £4k this tax year

Leaving £16,500 that can be deposited only to T212 (remaining replacement allowance of old money) + £20k anywhere.

Is that right?

Many thanks.

eskbanker

I have today contacted 5 ISA providers and none recognise this. They all say that withdrawals of current-year money can only be returned to the ISA account the money was withdrawn from.

Do you know if this rule automatically applies all flexible ISAs or if its optional? Presumably it wouldn't work if it's optional (given the universality of the rule).

It's not optional, and providers can't control it anyway. If you withdraw from provider A's flexible ISA and deposit into provider B, then A is compelled to report your net subscription, as is B, and neither can impose any restriction on your movement of money from one to the other.

Could you also please help clarify my understanding of how replacing withdrawals of prior year deposits works with this rule?

This is my situation:

I deposited only £4k this tax year

Withdrew £4k this tax year (resetting allowance back to £20k regardless of provider?)

Withdrew £20,500 this tax year (money deposited in previous tax year)

Deposited £4k this tax year

Leaving £16,500 that can be deposited only to T212 (remaining replacement allowance of old money) + £20k anywhere.

Is that right?

Were the transactions in that order and was the £4K redeposited into the same ISA it came from?

octoask

https://forums.moneysavingexpert.com/discussion/comment/81947595#Comment_81947595

Thanks for this.

Yes, the transactions were in that order.

Yes, the £4k was redeposited into the same ISA it came from (T212).

My understanding is that the £4K re-deposit is classed as a replacement fund, counted against the £20.5K withdrawal, which is why my allowance remains at £20k for any ISA and, technically, £36,500 for the T212 account (remaining 16.5k replacement + full 20k allowance).

Is that right?

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81947622#Comment_81947622

Yes, you can replace up to £16.5K into T212, and still have your full £20K 2025/26 allowance on top of that, until Sunday…

octoask

https://forums.moneysavingexpert.com/discussion/comment/81947640#Comment_81947640

Thanks for your help. You know more than the ISA providers!

Do you work at for a bank or HMRC by any chance? Or just very well-informed? :D

nottsphil

https://forums.moneysavingexpert.com/discussion/comment/81947595#Comment_81947595

Vanquis appear to have their own rules

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81947678#Comment_81947678

No, I don't work for a bank or HMRC but do spend way too much time on here (but not enough to be sure of being 100% right every time, so certainly not infallible!).

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81947686#Comment_81947686

Yes, as well as providers not knowing/accepting the current (July 2025) rules on flexibility, many also don't know/accept the (April 2024) rule changes allowing current year money to be spread across multiple ISAs of the same type.