Stocks & shares ISA rules

[cinelli]

I have been listening to the FT podcast for some time. In the show of 19 April contributor James Max stated (at about 16 min 30 sec)

“You can withdraw money from your ISA during the tax year and put it back in and not lose that tax wrapper.”

Is this correct, please? My understanding was that you can’t do this. Coming from the FT you would think that information like this comes with some authority. You can find the podcast by googling "ft.com money clinic".

Thank you.

Cinelli

[XFool]

...It is correct. But only if your ISA is a "Flexible ISA".

https://investingreviews.co.uk/isas/what-is-a-flexible-isa/

[pje16]

Good knowledge, and thanks for the link
It's amazing how many do not offer it

[staffordian]

I have been listening to the FT podcast for some time. In the show of 19 April contributor James Max stated (at about 16 min 30 sec)

“You can withdraw money from your ISA during the tax year and put it back in and not lose that tax wrapper.”

Is this correct, please? My understanding was that you can’t do this. Coming from the FT you would think that information like this comes with some authority. You can find the podcast by googling "ft.com money clinic".

Thank you.

Cinelli

Theoretically possible, I believe, in the sense that rules were changed a year or two ago, but I've yet to see any provider implement it for a cash ISA, let alone a stocks and shares ISA.

And even then there are restricitions about how much you can withdraw and replace, though I don't recall what they are. Probably it's limited to withdrawing current year's contributions then replacing them, or something similar.

[GoSeigen]

I have been listening to the FT podcast for some time. In the show of 19 April contributor James Max stated (at about 16 min 30 sec)

“You can withdraw money from your ISA during the tax year and put it back in and not lose that tax wrapper.”

Is this correct, please? My understanding was that you can’t do this. Coming from the FT you would think that information like this comes with some authority. You can find the podcast by googling "ft.com money clinic".

Thank you.

Cinelli

Theoretically possible, I believe, in the sense that rules were changed a year or two ago, but I've yet to see any provider implement it for a cash ISA, let alone a stocks and shares ISA.

And even then there are restricitions about how much you can withdraw and replace, though I don't recall what they are. Probably it's limited to withdrawing current year's contributions then replacing them, or something similar.

Might be worth finding out a bit more about this before writing about it so confidently! I've had and used three of these accounts for several years. I have a Nationwide cash ISA which is flexible and an IGIndex Stocks and Shares ISA, also flexible. As far as I am aware there is no limit on how much you can withdraw, but if you don't return the funds before the tax year end they cannot be added back later.

I expect there are many providers out there besides the ones I've mentioned.


GS

[staffordian]

I have been listening to the FT podcast for some time. In the show of 19 April contributor James Max stated (at about 16 min 30 sec)

“You can withdraw money from your ISA during the tax year and put it back in and not lose that tax wrapper.”

Is this correct, please? My understanding was that you can’t do this. Coming from the FT you would think that information like this comes with some authority. You can find the podcast by googling "ft.com money clinic".

Thank you.

Cinelli

Theoretically possible, I believe, in the sense that rules were changed a year or two ago, but I've yet to see any provider implement it for a cash ISA, let alone a stocks and shares ISA.

And even then there are restricitions about how much you can withdraw and replace, though I don't recall what they are. Probably it's limited to withdrawing current year's contributions then replacing them, or something similar.

Might be worth finding out a bit more about this before writing about it so confidently! I've had and used three of these accounts for several years. I have a Nationwide cash ISA which is flexible and an IGIndex Stocks and Shares ISA, also flexible. As far as I am aware there is no limit on how much you can withdraw, but if you don't return the funds before the tax year end they cannot be added back later.

I expect there are many providers out there besides the ones I've mentioned.


GS

I don't think I wrote confidently

Hence the "I've yet to see" and "probably"

More a confirmation that what the OP heard was right, and was worthy of investigating if it piqued his interest.

And to warn that it should not be assumed you can just go ahead and do this with any old ISA.

[CryptoPlankton]

I have been listening to the FT podcast for some time. In the show of 19 April contributor James Max stated (at about 16 min 30 sec)

“You can withdraw money from your ISA during the tax year and put it back in and not lose that tax wrapper.”

Is this correct, please? My understanding was that you can’t do this. Coming from the FT you would think that information like this comes with some authority. You can find the podcast by googling "ft.com money clinic".

Thank you.

Cinelli

Theoretically possible, I believe, in the sense that rules were changed a year or two ago, but I've yet to see any provider implement it for a cash ISA, let alone a stocks and shares ISA.

And even then there are restricitions about how much you can withdraw and replace, though I don't recall what they are. Probably it's limited to withdrawing current year's contributions then replacing them, or something similar.

Firstly, it has to be a "flexible" ISA, which is entirely down to whether the provider wishes to offer it as such (I believe most S&S ISA's still aren't flexible). If it is a flexible ISA then you can withdraw and replace up to the annual subscription limit without affecting your current year's allowance. So you could withdraw £20000, replace it and subscribe another £20000 in the same tax year. The bit that caught me out was that it appears the replacement of the funds is treated as an additional subscription so, as you are only allowed to subscribe to one S&S ISA in a tax year, all this has to occur within the same account. (I had already subscribed to another account so was unable to replace the funds I had withdrawn, despite it being from a flexible ISA.)

I brought this up in another thread, in which SteelCamel kindly did the donkey work to establish how it works:

viewtopic.php?p=485125#p485125

[JohnB]

I think you can withdraw previous years contributions too, see https://www.moneysavingexpert.com/savin ... ible-isas/

What I'm not sure of is whether you can move previous years contributions from a s&s isa to a flexible cash one, withdraw it and later that year reverse the whole process. You might want to do this to avoid a bridging loan on a staggered house purchase

[JohnB]

https://www.gov.uk/guidance/manage-isa- ... tors#f-isa is very detailed, but doesn't rule out my scheme.

I invest £19k in S&S in April and hold back £1k to March in case I need to open a cash ISA to do this each year, as a house move is possible.

[GoSeigen]

I brought this up in another thread, in which SteelCamel kindly did the donkey work to establish how it works:

viewtopic.php?p=485125#p485125

I don't agree with SteelCamel's reading of the regulations. By my reading**, if an investor replaces withdrawn cash it must be to the account it was drawn from unless it counts towards the current year's subscription limit, in which case it can be made to any of the investor's ISAs subject to his only subscribing to one of each type.

So I think there is no limit to the number of flexible ISAs you can withdraw from and pay back to, but the repayments must in general be back to the same account they were taken from (certainly if the year's subscription limit has been reached).

GS
(**)Referring to SteelCamel's post on the subject, the payment back of money withdrawn from a flexible ISA is not considered a Subscription but is a Replacement Subscription which is separately defined in Clause 5DDB(1) of the regulations.

[paulnumbers]

I have been listening to the FT podcast for some time. In the show of 19 April contributor James Max stated (at about 16 min 30 sec)

“You can withdraw money from your ISA during the tax year and put it back in and not lose that tax wrapper.”

Is this correct, please? My understanding was that you can’t do this. Coming from the FT you would think that information like this comes with some authority. You can find the podcast by googling "ft.com money clinic".

Thank you.

Cinelli

Theoretically possible, I believe, in the sense that rules were changed a year or two ago, but I've yet to see any provider implement it for a cash ISA, let alone a stocks and shares ISA.

And even then there are restricitions about how much you can withdraw and replace, though I don't recall what they are. Probably it's limited to withdrawing current year's contributions then replacing them, or something similar.

Firstly, it has to be a "flexible" ISA, which is entirely down to whether the provider wishes to offer it as such (I believe most S&S ISA's still aren't flexible). If it is a flexible ISA then you can withdraw and replace up to the annual subscription limit without affecting your current year's allowance. So you could withdraw £20000, replace it and subscribe another £20000 in the same tax year. The bit that caught me out was that it appears the replacement of the funds is treated as an additional subscription so, as you are only allowed to subscribe to one S&S ISA in a tax year, all this has to occur within the same account. (I had already subscribed to another account so was unable to replace the funds I had withdrawn, despite it being from a flexible ISA.)

I brought this up in another thread, in which SteelCamel kindly did the donkey work to establish how it works:

viewtopic.php?p=485125#p485125

That's not correct. Replacements aren't contributions, check the 2nd paragraph.

https://assets.publishing.service.gov.u ... e_ISAs.pdf

Replacement of flexible ISA not counted as subscription example

Mr Kennedy has previous year funds of £20,000 in his cash ISA. On 6 April 2017 his ISA manager changes the account terms and conditions to offer flexibility and on 8 April Mr Kennedy makes current year subscriptions of £5,000. On 8 June Mr Kennedy withdraws £12,000. The withdrawals are deemed to be firstly the £5,000 current year subscriptions, and secondly £7,000 of previous year funds. At this point Mr Kennedy’s ‘net’ current year subscriptions are £nil and he can use his full 2017-18 annual subscription limit of £20,000 between his cash ISA and any stocks and shares, innovative finance or Lifetime ISA he subscribes to in 2017-18. He can replace the £7,000 previous year funds only with his cash ISA manager - at any time before 6 April 2018.

If Mr Kennedy has not made any current year subscriptions, the withdrawal of £12,000 on 8 June would all have been of previous year funds. Mr Kennedy could replace them at any time before 6 April 2018 in this cash ISA. And he could use his 2017-18 year subscription allowance between one cash, one stocks and shares, one innovative finance and one Lifetime ISA as he chooses.

[CryptoPlankton]

I have been listening to the FT podcast for some time. In the show of 19 April contributor James Max stated (at about 16 min 30 sec)

“You can withdraw money from your ISA during the tax year and put it back in and not lose that tax wrapper.”

Is this correct, please? My understanding was that you can’t do this. Coming from the FT you would think that information like this comes with some authority. You can find the podcast by googling "ft.com money clinic".

Thank you.

Cinelli

Theoretically possible, I believe, in the sense that rules were changed a year or two ago, but I've yet to see any provider implement it for a cash ISA, let alone a stocks and shares ISA.

And even then there are restricitions about how much you can withdraw and replace, though I don't recall what they are. Probably it's limited to withdrawing current year's contributions then replacing them, or something similar.

Firstly, it has to be a "flexible" ISA, which is entirely down to whether the provider wishes to offer it as such (I believe most S&S ISA's still aren't flexible). If it is a flexible ISA then you can withdraw and replace up to the annual subscription limit without affecting your current year's allowance. So you could withdraw £20000, replace it and subscribe another £20000 in the same tax year. The bit that caught me out was that it appears the replacement of the funds is treated as an additional subscription so, as you are only allowed to subscribe to one S&S ISA in a tax year, all this has to occur within the same account. (I had already subscribed to another account so was unable to replace the funds I had withdrawn, despite it being from a flexible ISA.)

I brought this up in another thread, in which SteelCamel kindly did the donkey work to establish how it works:

viewtopic.php?p=485125#p485125

That's not correct. Replacements aren't contributions, check the 2nd paragraph.

https://assets.publishing.service.gov.u ... e_ISAs.pdf

Replacement of flexible ISA not counted as subscription example

Mr Kennedy has previous year funds of £20,000 in his cash ISA. On 6 April 2017 his ISA manager changes the account terms and conditions to offer flexibility and on 8 April Mr Kennedy makes current year subscriptions of £5,000. On 8 June Mr Kennedy withdraws £12,000. The withdrawals are deemed to be firstly the £5,000 current year subscriptions, and secondly £7,000 of previous year funds. At this point Mr Kennedy’s ‘net’ current year subscriptions are £nil and he can use his full 2017-18 annual subscription limit of £20,000 between his cash ISA and any stocks and shares, innovative finance or Lifetime ISA he subscribes to in 2017-18. He can replace the £7,000 previous year funds only with his cash ISA manager - at any time before 6 April 2018.

If Mr Kennedy has not made any current year subscriptions, the withdrawal of £12,000 on 8 June would all have been of previous year funds. Mr Kennedy could replace them at any time before 6 April 2018 in this cash ISA. And he could use his 2017-18 year subscription allowance between one cash, one stocks and shares, one innovative finance and one Lifetime ISA as he chooses.

(My red)

I'm not sure I said (I certainly didn't mean) that the replacement was a "contribution" in the sense that it reduced the subscription allowance, if that is what you are suggesting? After my own withdrawal, my account stated that my current tax year's allowance had become £20k plus the amount of the withdrawal. This led me to believe I could replace it and still contribute my 'new' £20k to any S&S ISA. However, when I went to make the replacement, I was told I must declare that I had not made a subscription to any other S&S ISA in the tax year.

The second paragraph of the example you cite is for a cash ISA, and for when no subscriptions have been made in the tax year. In the first paragraph (when a subscription has been made in the same tax year as the withdrawal) it appears that the replacement and subsequent cash ISA subscription must both be made to the existing cash ISA ("his cash ISA").

I suspect that even the providers aren't entirely clear on the rules - it could even be possible I was denied the opportunity to legitimately replace the withdrawn funds from my ISA. Still, since the provision of a flexible ISA is discretionary in the first place, challenging the provider's rules would probably have been futile - and really not worth the bother anyway...

[paulnumbers]

I was told I must declare that I had not made a subscription to any other S&S ISA in the tax year.

I would suggest your bank has made an error here in requesting you to do declare this.

it appears that the replacement and subsequent cash ISA subscription must both be made to the existing cash ISA ("his cash ISA").

The replacement must be made in the same one you took it out of, further subscriptions can go anywhere. (past years anyway, there's the caveat that current year replacements can go anywhere!) You can run many past year flexible ISA's in parallel, withdrawing and crediting as many times as you want, and that's all totally separate from what you do with new subscriptions. You can determine all this by reading the "ISA guidance for managers" documentation, where they explain how they notify HMRC of contributions, it is a little dry though.

I suspect that even the providers aren't entirely clear on the rules

Quite possibly the front line people. It's simple, but it's not necessarily obvious!

[XFool]

I suspect that even the providers aren't entirely clear on the rules - it could even be possible I was denied the opportunity to legitimately replace the withdrawn funds from my ISA.

This is entirely possible, indeed there might even be more to it than that.

I know nothing of flexible ISAs, but all this brings to mind my experience years ago with Cash ISAs, TESSAs and TESSA ISAs. Cash ISAs were operating, TESSAs had come to the end of their life and, all over the place, providers were starting "TESSA ISAs" to "invest your ISA cash".

Somebody on TMF suggested there was no reason why the cash from a maturing TESSA should not simply go into an existing Cash ISA - no necessity for a "TESSA ISA". I looked into this and came to the same conclusion.

I tried (with my Cash ISA provider) - no go! I rang HMC to check the facts and managed to get to speak to the very man who wrote the ISA manual (wouldn't happen now!). I still remember his words: "Oh, they are not still saying that, are they? I only just rewrote the manual to clarify this."

I went back to my ISA provider, still no go. Eventually somebody more senior contacted me. Yes, I was correct, however their existing IT system simply wouldn't allow this.

Still, since the provision of a flexible ISA is discretionary in the first place, challenging the provider's rules would probably have been futile - and really not worth the bother anyway...

Indeed. It could be the ignorance of the front line staff, the programming of the IT system they are using simply doesn't comply with the full Flexible ISA rules, or it could just be a company policy.

[cinelli]

Thank you all for the information. Incidentally I have written to the FT for clarification but am yet to receive a reply.

Cinelli

[paulnumbers]

Thank you all for the information. Incidentally I have written to the FT for clarification but am yet to receive a reply.

Cinelli

here was the page I mentioned, enjoy

https://www.gov.uk/guidance/manage-isa- ... tors#f-isa