New Cash ISA Flexibility Extends to Previous Years’ Subscriptions

Written by Karen Bryan

£20 and £10 notes diagonal 240When I first read about the new Flexible ISAs, I thought that being able to replace any money withdrawn from a Cash ISA during the current tax year was a good idea.

Previously, any money that you took out of a Cash ISA could not be replaced. For example, if you put in the full annual ISA allowance of £15,240 into a new instant access Cash ISA on 6 April 2015, then withdrew £10,000 on 1 July 2015, you were left with £5,240 as your Cash ISA contribution for the tax year 6 April 2015 to 5 April 2016.

Whereas, in the current tax year starting 6 April 2016 with a Flexible ISA, you would now have the option to replace the £10,000 withdraw by the 5 April 2017, allowing you to the retain the full £15,240 annual allowance.

What I hadn’t realised is that this flexibility extends to previous years’ Cash ISA subscriptions. Again, the rule is that any money withdrawn must be replaced by the end of the tax year in which the withdrawal was made.

As an example, let’s say that you have a Cash ISA pot of £33,000, consisting of annual subscriptions of £3,000 for the previous ten tax years, plus interest. You could withdraw £10,000 on 1 July 2016. As long as you replaced that £10,000 by 5 April 2017, you could retain the £33,000 Cash ISA pot.

But not all providers are offering Flexible ISAs. If you think that this flexibility would be useful, then you need to double-check that your provider offers Flexible ISAs.