Flexible ISA Question

alongtimetogoyet

Hi,

I'm confused about what's legally allowed when operating a Flexible ISA in conjunction with other non-flexible ISAs. In theory could I contribute £15k of my annual allowance across cash/S&S ISAs and then with a flexible one could I contribute £10k and ensure that £5k is withdrawn to ensure a net balance of £5k, thereby keeping me at £20k for the year.

Im sure there must be some rules around this as what's to stop someone putting all their money in there to avoid tax and then withdrawing at year end before putting it back again.

I have a Chip flexible ISA for context,

TiA.

zagfles

What makes you think you can do that? If you've paid in £15k to ISAs this tax year you can't then pay £10k to a flexible ISA, you'll exceed the £20k limit. See the MSE guide here

Flexible ISAs: how they work & which banks do it - MoneySavingExpert

MACKEM99

https://forums.moneysavingexpert.com/discussion/comment/82080731#Comment_82080731

Not even if they take 5k out? As long as its the same ISA?

zagfles

https://forums.moneysavingexpert.com/discussion/comment/82080748#Comment_82080748

If they take £5k out first, then they can pay that £5k back in plus another £5k of allowance that's left, but so what, it's not any sort of loophole that can be exploited. OP seemed to think you can exceed the £20k limit as long as you withdraw enough before the end of the tax year. You can't.

alongtimetogoyet

https://forums.moneysavingexpert.com/discussion/comment/82080752#Comment_82080752

Appreciate the answers but I'm still confused. My Chip Flexible ISA has regular ins/outs. At the moment it is saying my used allowance is £3.2k. Therefore if this ends up at zero by year end (I.e with more outgoings than incomings) then am I allowed to use my £20k allowance across other products?

Thanks.

zagfles

Basically you can replace what you've withdrawn, once you've withdrawn it. See the article.

If you think this creates any kind of loophole that lets you save more than the ISA allowance, even temporarily, you haven't understood.

flaneurs_lobster

https://forums.moneysavingexpert.com/discussion/comment/82080822#Comment_82080822

The Chip account can (obviously) only take account of your net position on the ISA(s?) you hold with them.

Other EA ISA products (not all) also have such "allowance remaining" counters, in the case of non-flexible products the counter will not decrease despite withdrawals being made.

Regardless of these counters (or your own book-keeping) you cannot add more than £20k (this year) of new funds to your ISAs.

alongtimetogoyet

https://forums.moneysavingexpert.com/discussion/comment/82080838#Comment_82080838

I'm not looking for any loophole - I want to be sure that what I am doing is within the rules. I may not have put my point across very well. All I need to know is that if my flexible ISA allowance at year end is zero then am I able to utilise my £20k across other products. In effect I may have made total gross contributions in excess of £20k but overall the net figure will be £20k if the flexible ISA is zero.

slinger2

You can utilise your £20k across other products but only after you've got your other ISA allowance to zero. You're not allowed to have more than £20k of new money added at any point. Flexible ISAs let you "replace" money you've "withdrawn". You can't replace it until after you've withdrawn it.

dcs34

Put the 'flexible' part to one side for a bit. Say you opened two Cash ISAs and put £20k into both. Each provider, not knowing what you've deposited with other institutions, would quite happily tell you that you've fairly used your £20k allowance. Then say you close or withdraw £20k from one of the accounts, leaving only £20k in at the end of the tax year. When the banks report to HMRC it will be clear to them that you've breached the rules and deposited a gross amount of £40k into ISAs; not £20k. They (and/or your banks) will expect you to correct the situation which may include penalties or account closures.

Now, assume one of those Cash ISAs is flexible. You pay £20k in; then pay £10k back out. That provider will tell you that you've still got £10k of allowance left. You could put it back in that account, or pay it into another ISA. Either would be OK, because at no point in time have you deposited more than £20k into ISAs that tax year.

If however you put £20k into a flexible ISA, then put £20k into another ISA, and on 5th April withdrew the £20k from your flexible ISA, well that's no different to the first scenario except that technically you were compliant for a few hours at the end of April 5th. But HMRC will still have flagged the £40k you'd had deposited for most of the year.

alongtimetogoyet

https://forums.moneysavingexpert.com/discussion/comment/82081064#Comment_82081064

Thanks for your help. The problem I have with the flexible ISA is that there are multiple in/out transactions so it makes it difficult to determine which deposits are technically replacing previous withdrawals. The Chip App says my used allowance is £3.2k which is the net difference between deposits/withdrawals. However I'm not sure that this is correct as I had deposited £3.8k this year before any withdrawals were made. I have contacted Chip for advice as I'm struggling to get an answer I am confident with.