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Why savers should consider a flexible ISA

By:

Freelance Journalist

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Savers are looking for ways to use their ISA allowance before the tax year ends, and a flexible ISA is well worth considering.

A flexible ISA is tax-friendly as it allows users to withdraw money and repay it without affecting their annual allowance, so long as any money is repaid in the same tax year.

Flexible ISAs are most useful to those with large savings that max out their £20,000 ISA allowance – the amount an individual can put into an ISA every tax year before paying tax.

With a non-flexible ISA, cash withdrawn still erodes your ISA allowance.

For example, someone who maxes out their ISA allowance by paying £20,000 in a tax year and then takes out £10,000 will halve their allowance to £10,000.

Flexible ISAs can be cash, investment or innovative finance ISAs.

Not all ISAs are flexible.

For example, junior ISAs and Lifetime ISAs are never flexible, and cash, investment, or innovative finance ISAs are not guaranteed to be either.

Examples of non-flexible ISAs include the Hargreaves Lansdown Cash ISA, Santander Easy Access ISA and HSBC Loyalty Cash ISA.

Any money taken out of a non-flexible ISA will lose its tax-free earnings status and cannot be replaced using more of that year’s ISA allowance.

Another point to be aware of is that if you transfer a flexible ISA, your new provider may not offer the same flexibility.

A Savings Champion spokesperson said: “Not all ISAs are flexible – it is up to the providers whether they offer this as part of their product or not and there are specific rules on how the withdrawals have to be transacted, so you should check before you make any withdrawals to see what the rules are with your provider.”

Which providers offer flexible ISAs?

Not all ISA providers offer flexible ISAs, so it’s worth checking if a provider does before opening an account. Here’s a short list of providers that offer flexible stocks and shares ISAs: