Flexible ISAs guide

What is a flexible ISA?

With a flexible ISA, money can be moved in and out of the account without affecting your yearly ISA allowance, as long as it’s replaced the same tax year.

This means you can use the flexibility to withdraw money invested in previous tax years, and replace it without affecting your current ISA allowance.

How will I know if my ISA is flexible?

Here at Newcastle Building Society, we’ve made most of our Cash ISAs flexible, including existing accounts that we no longer offer to new customers.

Not all banks and building societies are required to offer flexible ISAs. Make sure you check the terms and conditions of your account, or speak to your ISA provider before making any withdrawals. Some ISA accounts might be flexible, but a penalty may still apply for making a withdrawal, so you will also need to check this in your terms.

If your ISA is not flexible, making a withdrawal and then paying money back into the account will be classed as a subscription, this will count towards your yearly allowance.

How do I maximise my ISA allowance?

Just like standard ISAs, flexible ISAs can be either cash, or stocks and shares.

You can open as many ISAs as you’d like each tax year, whether or not these are flexible.

One way to make the most of your full ISA allowance for the tax year is using our CustomISA. With CustomISA, you can spread your yearly ISA allowance across as many of our ISA products as you’d like, including Cash ISAs and Stocks and Shares ISAs.

CustomISA can help you when it comes to making flexible withdrawals too. If you make a withdrawal from a fixed rate account which allows no further deposits, you can still replace those funds in the same tax year, simply by depositing them into another ISA product with us, making sure you don’t miss out.

How does a flexible ISA work?

A flexible ISA works by simply allowing you to replace any money withdrawn from your ISA without affecting your annual ISA allowance.

As a result there are two ISA allowances:

Yearly ISA allowance

This is the amount you can invest into an ISA within a tax year. Currently this amount is £20,000 for the tax year and can change on a yearly basis.

Flexible ISA allowance

This is the amount withdrawn from previous years’ ISA allowances. This amount can be re-invested with the existing provider. This amount will be reset at £0 at the beginning of the new tax year.

As with all ISAs there are rules, the key ones are:

• Any ISA money withdrawn must be reinvested within the same tax year (6 April – 5 April) to avoid being classed as a new subscription.
• Any money reinvested will count towards the flexible ISA allowance first.

Transferring a flexible ISA

Flexible ISA transfers work in the same way as standard ISA transfers. You can choose to transfer all or part of your ISA subscription regardless of when you paid money in.

Your ISA provider will let your new provider know how much tax-free allowance you have remaining for the current tax year, taking into account any withdrawals you’ve made from current tax year subscriptions.

However, if you wish to transfer previous years ISA subscriptions, your existing ISA provider will transfer the balance requested and not inform your new ISA provider of any withdrawals.

This means if you close all your existing ISAs, your flexible ISA allowance will be £0 and you will not be able to replace any withdrawals made from previous years’ subscriptions.

Closing a flexible ISA

If you hold only one flexible ISA product and choose to close it, you will be unable to re-open it at a later date if you want to replace the money you’ve withdrawn, as it wasn’t replaced whilst the account was still open.

If you hold multiple ISAs and you choose to close one, using our CustomISA facility, you will be able to replace withdrawals made into another ISA product (subject to product terms and conditions).

Stocks and shares flexible ISAs

A stocks and shares ISA is different to our savings products as they allow you to invest within the wrapper of an ISA. We can introduce you to Newcastle Financial Advisers Ltd, who have a Financial Adviser in each of our branches. They offer face to face advice and investments including stocks and shares ISAs.

There are risks involved with investing. A stocks & shares ISA is a medium to long term investment, which aims to increase the value of the money you invest for growth or income or both. The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.

Approved by The Openwork Partnership on 01/08/2024.

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