Flexible ISA and transferring to S&S ISA during the tax year?

AspiringPensioner

Hi all,

Another dense question from me that I hope more experienced forumites may be able to answer, 😄 around flexible ISAs. Although my partner and I have both saved into cash ISAs over many years, we've been overly cautious about stocks and shares ISAs. However, we're each intending to put a portion of this year's ISA allowance into a global tracker fund. We want to pay in a regular monthly amount rather than just a big lump at the start of the year. So I was thinking that the ideal thing would be to put this cash into flexible cash ISAs then drip feed it into the Stocks & Shares ISAs each month. I'm aware of flexible ISAs but have never taken that much notice, as I've never wanted/needed to take cash back out of an ISA once I've put it in. I've re-read the MSE guide's section on flexible ISAs (copied below) and want to double check to make sure I understand correctly:

"Some cash ISAs are flexible meaning you can replace cash withdrawn from them in the same tax year without it using up your year's ISA limit. In practice, this means that if you had £1,000 in a flexible cash ISA you could withdraw £500 and replenish it later in the tax year without affecting your ISA limit. Current tax year subscriptions can be replaced in the same or any other ISA (it doesn't have to be flexible) and it won't count towards your £20,000 allowance."

So in my scenario, if I were to open (for instance) the Manchester BS Base Rate Tracker ISA (a flexible one) and stick £5,000 in there, over the course of the year I can withdraw £500 at a time (or however much) INTO my current account in order to fund my monthly DD to my S&S ISA. Is it OK to do that rather than use an ISA transfer process? Then by the end of the tax year the full £5,000 has gradually moved from the Cash ISA to the S&S ISA, but because the source ISA is a flexible one, the funds are only counted once, not as £5k invested in both ISAs (ie £10k total)?

Thanks for any feedback, and hopefully confirmation that I have understood things correctly. 👍️

eskbanker

Yes, you've understood correctly, although an alternative would be to deposit the £5K straight into the S&S ISA and initially buy into a low-risk investment such as a short term money market fund, drip-feeding from there into the global tracker.

InvesterJones

Yes, though for the sake of convenience you can also hold cash in a S&S ISA, or invest in a cash-like money market fund, and then drip feed from there to something else within the S&S ISA.

AspiringPensioner

Thanks for the replies, that's great to have that confirmed.